Macau’s Melco Resorts & Entertainment is expected to reduce its operating leverage, calculated as Adjusted DEBT/EBITDA, from around 6.7x as of 30 June 2025 to around 5.4x in 2026 due to a continued increase in its revenues and profits.
The forecast by ratings agency Moody’s also estimates that Studio City – the Macau integrated resort of which Melco holds a controlling 54.9% interest – will decrease its leverage ratio from 8.1x to 6.2x during the same period.
Moody’s this week affirmed the ratings of core Melco subsidiaries, specifically the Ba3 corporate family rating of Melco Resorts Finance Limited, the B1 CFR and senior unsecured ratings of Studio City Finance Limited and the Ba3 backed rating on the USD senior secured bonds of Studio City Company Limited, maintaining a stable outlook.
“The affirmation and stable outlooks of the Melco group companies reflect our expectation that their financial leverage will gradually improve over the next 12 to 18 months, underpinned by continued growth in Macau’s overall gaming revenues and their strengthening market position,” said Stephanie Lau, a Moody’s Ratings Vice President and Senior Credit Officer.
Moody’s explained that it sees the revenues of group parent Melco Resorts & Entertainment growing by 14% in FY25 and continuing to rise in 2026, while Studio City’s revenues should grow by around 13% in 2025 and a further 5% in 2026.
Likewise, Melco’s Adjusted EBITDA is forecast to improve to around US$1.3 billion in 2026 from US$1.1 billion in 2024 and Studio City’s Adjusted EBITDA to around US$300 million in 2026 from US$200 million in 2024 – driven by higher gaming volumes and revenues across its mass and premium mass segments, as well as steady profitability and market shares.
“With increased earnings and the completion of major capital spending projects, Melco Resorts & Entertainment and Studio City will generate free cash flow and gradually reduce their debt over the next 12 to 18 months,” the agency said.
“Melco’s credit quality continues to benefit from its established operations and high-quality assets, as well as Macau’s good growth prospects. These considerations mitigate the risk associated with the company’s geographic concentration in Macau, where gaming GGR is subject to policy changes in Macau and China.”
RelatedPosts
