Wynn Resorts given junk credit rating but New York remains pivotal to leverage plans

Article by : Charles Perrin Nov 23, 2023

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Wynn Resorts has been given a “stable” financial outlook by Standard & Poor’s (S&P), despite only seeing its credit rating rise by one level.

The upgrade from B+ to BB- is deemed to be three notches below investment-grade territory, however, the rating was also applied to the Wynn Macau unit.

At first glance, the report suggests that Macau is in a stronger position on the gaming front compared to its US counterparts, at least judging by their mass-market gross gaming revenue figures (GGR).

In their report, S&P said: “The stable outlook reflects our expectation that the ongoing recovery in the company’s cash flow in Macau, along with relatively stable US cash flow next year, will likely support an improvement in its leverage to the high-4x area, from low-5x in 2023, despite its increasing shareholder returns.”

Of the current rewards offered to Wynn shareholders, they are entitled to continual buybacks and the resumption of quarterly dividends.

But it’s not all doom and gloom for 2024, and investors think that New York could hold the key to bolstering leverage.

Indeed, Wynn Resorts has teamed up with real estate firm Related Cos. in an attempt to procure one of the three New York casino licenses that will be distributed by gaming regulators.

And S&P is confident Wynn Resorts is in a position to absorb the increased expenditure next year when the fate of the casino proposal is likely to be determined.

The report added: “New York is the wild card in terms of potential spending that could increase the operator’s leverage.

“Should it be one of the winners, the company would likely embark upon a $5 billion (or more) project, though costs would be shared with Related.”

It is thought that if Wynn were successful with their application, the project could take up to four years to complete.

In the meantime, while the credit rating currently falls into the supposed junk category, things could quickly change over the next 12 months.