Moody’s Investors Service upgraded the credit outlook of Wynn Resorts’ (NASDAQ: WYNN) finance unit from “stable” to “positive.” The research company kept a “B1” rating on Wynn’s debt, which is four levels into junk status. 

Moody’s mentioned the continuous recovery in Macau and the robust performance at Wynn’s casinos in Las Vegas and Encore Boston Harbor as some of the factors for the upgrade. Results for the third quarter for Macau operators, such as Wynn Macau, were lukewarm, yet gross gaming revenue (GGR) in the Chinese region has significantly increased since the beginning of the coronavirus pandemic, and this trend is anticipated to persist into 2025.

"The rating affirmation and positive outlook reflect our projection of improved leverage for Wynn in the mid 5x debt/earnings before interest, taxes, depreciation, and amortization (EBITDA) range for 2024, as Macau’s gaming market has recovered significantly and continued strong performance at the company’s Las Vegas and Encore Boston Harbor properties have supported revenue and EBITDA growth,” observed Moody’s.

The ratings agency noted that Wynn's enhanced credit profile reflects "the quality, popularity, and positive reputation of the company's resort properties," which Moody's identifies as key differentiators. 

Wynn's 'Optimistic' Perspective Has Depth 

Wynn ended the September quarter with $1.34 billion in cash and $11.79 billion in debt, and its initiatives to reduce the latter amount are part of the rationale for Moody's upgraded outlook. 

The research agency observed that the gaming company based in Las Vegas has made substantial efforts to reduce its debt load. These initiatives are frequently seen positively by rating agencies and can lead to enhanced credit ratings, subsequently lowering financing expenses. 

“The positive outlook also reflects the company’s recent reduction in debt, with nearly $1.2 billion of debt permanently reduced. The positive outlook also incorporates our view that the company will maintain good liquidity, with ample cash balances,” according to Moody’s.

The research company also observed that the optimistic outlook for Wynn hinges on anticipated continued EBITDA enhancement in Macau alongside overall revenue growth. If achieved, those elements ought to assist the operator in maintaining strong liquidity while lowering existing debts. 

Wynn Casino UAE May Assist 

Wynn’s existing portfolio includes two integrated resorts in Macau, Wynn and Encore Las Vegas, along with Encore Boston Harbor. There's limited geographic diversity, which Moody's pointed out could pose a credit risk. 

The operator's casino resort being built in Ras Al Khaimah, United Arab Emirates (UAE) enhances geographic diversity. The location, called Wynn Al Marjan Island, is anticipated to launch in early 2027 and will benefit from a multi-year monopoly in what might ultimately evolve into one of the largest gaming markets globally. 

Regarding a possible ratings upgrade, Moody’s states that Wynn must ensure sufficient liquidity and persist in reducing debt to make an upgrade feasible.

“Ratings could be upgraded if debt/EBITDA on a Moody’s adjusted basis is maintained well below 6x. Good liquidity and continued revenue growth with strong positive free cash flow would also be needed for an upgrade,” concluded the ratings agency.