Melco Resorts & Entertainment paid down almost US$1 billion in debt in 2023 as it looks to deleverage in the wake of the COVID-19 pandemic, the company revealed.
Speaking with analysts during its 4Q23 earnings call late last week, Melco said it paid back US$200 million on its revolver and repurchased US$100 million of Studio City bonds by way of cash tender in the December quarter, taking its total debt repayments for the year to US$950 million.
While debt remains high at US$7.47 billion as of 31 December 2023, analysts estimate leverage to narrow back to 4.3x by the end of 2024 with Melco confirming that lowering debt will remain its key focus for the year ahead.
“Clearly the mandate is debt reduction – that’s the number one priority from a capital allocation standpoint,” explained Melco’s Chief Financial Officer, Geoff Davis. “At the same time, we are looking for capital light opportunities to expand the portfolio. But the key laser focus will be on debt reduction.”
Asked about the company’s capital expenditure in 2024, Chairman and CEO Lawrence Ho described upcoming CapEx as minimal following the recent opening of Studio City Phase 2, noting too that Melco’s non-gaming commitments were lower than its Macau competitors and waving off any concerns over those commitments jumping by 20% due to the strength of Macau’s recovery in 2023.
“Other than perhaps Galaxy (currently developing Galaxy Macau Phase 4), none of the operators really have any major, major CapEx projects in Macau because all the land has been used up,” said Ho, adding that Melco would spend between US$360 million and US$375 million this year.
“I think for us, as we continue to improve the product offering, we’ll look at … minor projects that can improve those, but I wouldn’t say there is any major CapEx on the horizon.
“With regards to our Macau government investment tender commitment, I think out of the six operators it’s public knowledge that we had the lowest amount. And I’m pleased to say that we were the only one last year that fulfilled our full amount, so I think going forward, even with the additional 20%, we’re comfortably below everybody else [in spending commitments].”
While costs are coming down, Melco wasn’t shy in admitting it had lost market share last year, which it said was the main reason for an executive reshuffle announced last week. With Chief Operating Officer (Macau Operations) David Sisk announcing his departure after eight years, Melco has hired Alidad Tash, as Executive Vice President of Analytics and Gaming Operations for Macau, Stefan Bollhalder as Vice President of Hotels and Food & Beverage for City of Dreams Macau and Linda Switzer as Vice President of Retail at Melco from April 1. Switzer was previously Vice President of Retail at Wynn with a view to clawing back lost ground.
“The goal for us is to really reclaim the crown in the premium mass sector,” explained Ho.
“And in order to do that, I think we need to work together as a team and with some of the new recent appointments to improve the quality of our offering.
“Frankly, post-COVID, looking around, we really did cut way too much of our offering out there. I think that’s why we lost some share from that basis, so I think that is being addressed. We have done it a million times in the past and we’ve enjoyed having the pro position in premium mass for a very long time, so the goal is to really reclaim that.
“But our number one goal continues to be debt reduction.”
