Macau concessionaire Melco Resorts & Entertainment remains well-positioned to continue paying down debt in the short-term, aided by healthy demand in Macau and strong free cash flow, according to CBRE Credit Research.
In a note, CBRE analysts Colin Mansfield and Connor Parks said the company’s de-leveraging trajectory was strong despite a proposed sale of its Philippines integrated resort investment City of Dreams Manila not coming to fruition during a recent strategic review.
Having seen group-wide debt peak at US$8.7 billion in 2022, Melco’s Chairman and CEO Lawrence Ho revealed in a post-pandemic analyst call that paying down debt would become the company’s core focus for the foreseeable future, and significant progress has been made since.
According to CBRE, subsidiaries Melco Resorts Finance (MPEL) – the operating entity of City of Dreams Macau, Altira Macau and Mocha Clubs – and Studio City have managed to grind their leverage lower to 5.8x and 7.1x respectively (with MPEL inclusive of HoldCo debt) after paying down another US$600 million in 2025 alone.
With another US$60 million already paid down this year, CBRE said, “We see management continuing to pay down debt in Macau, despite a sale in Manila not coming to fruition during its strategic review. The credit thesis is supported by the healthy demand in Macau, notwithstanding the continued, intense competition that is creating margin volatility.”
The analysts added that Melco’s next move is likely a paydown of its revolvers – namely US$1.5 billion owing on a 2020 revolver due 2027 – and for a potential opportunistic tender and refinancing of Studio City debt due 2027.
On general performance of the Macau market, which has aided Melco’s improving debt position, CBRE stated, “The intense competitive environment around reinvestment and volatility in property margins has not materially impacted the sector’s debt performance. We attribute this to revenue growth in the market, recovered balance sheets and healthy FCF (free cash flow) generation even with concession spending commitments and shareholder returns ramping up.”
