Moody’s Investors Robert William Service cut MGM Resorts International’s (NYSE:MGM) deferred payment rating to “B1” from “Ba3”, moving the casino operator’s tier ane snick further into non-investment tier territory.

Among other issues, Moody’s cites on-going weakness inward Macau as unity of the reasons for the downgrade. MGM owns almost 56 percent of MGM China.

The downgrade reflects the slow down recovery in Macau and the mellow leveraging layer the companionship is expected to hold followers a list of deals completed or to be completed soon,” said Moody’s.

The ratings bureau call on MGM arrives just years after Morgan Stanley expressed care around the hard cash burn mark rates of V of the hexad Macau concessionaires, noting Sands Communist China and MGM mainland China feature almost 3 quarters (nine months) worth of immediate payment to live on at stream burn down rates. However, the Las Vegas-based fellowship has $4.8 one million million inward immediate payment and a $1.67 one thousand million undrawn credit revolver as of the cease of 2021 patch the Macau manipulator has tote up liquidity of $1.68 billion.

Moody’s Questions MGM Transactions

While MGM has ace of the strongest balance sheets inwards the gaming manufacture and Wall Street for the most part praises the company’s asset-lite model, Moody’s voices concerns nigh some of the company’s transactions.

Those include the operator’s $2.12 one thousand million purchase of a 50 percent interest inward CityCenter, the $1.6 1000000000 acquisition of Cosmopolitan’s casino and hotel operating rights and the divestment of MGM Growth Properties (NYSE:MGP) to VICI Properties (NYSE:VICI).

While Moody’s highlights vibrancy in Las Vegas and MGM’s regional portfolio, the explore unfaltering notes earnings from those sources won’t live enough to countervail rising leverage.

“However, the earnings are non sufficiency to offset Moody’s aspect that the planned transactions are leveraging and that MGM testament maintain purchase significantly higher up pre-pandemic levels,” notes Moody’s. “Leverage is expected to follow maintained over 7x debt-to-EBITDA inward 2023, supra our 6x downgrade threshold level.”

MGM Not the Only One

Macau acting as a thorn in the side of meat of gaming operators is nil new since the scratch of the coronavirus pandemic.

“The gaming sphere has been unity of the sectors to the highest degree significantly affected past the appal given its sensibility to consumer exact and sentiment,” adds Moody’s. “More specifically, MGM remains vulnerable to a renewed spreading of the outbreak. MGM also remains exposed to discretional consumer disbursement that lead it vulnerable to shifts in marketplace sentiment inwards these unprecedented operating conditions.”

To follow fairish to the Bellagio operator, it’s non the only if casino whale to recently endure a deferred payment downgrade. In February, Standard & Poor’s (S&P) stripped-down Las Vegas Sands (NYSE:LVS) of an investment-grade rating, citing Macau woes.

Sands was lowered by S&P to “BB+,”or unity snick into junk territory, from “BBB-“ with a negative outlook.

“We are willing to looking out to 2023 for LVS to restore deferred payment measures because of the company’s high-quality plus portfolio and our belief that its gaming markets and assets testament eventually recover along with leisure, business, and chemical group travel,” said S&P inwards its story on Sands.