TEXT-Fitch: U.S. gaming stable in 2013 with focus on shareholders, growth
Link to Fitch Ratings' Report: 2013 Outlook: U.S. Gaming (Return Generation in Full Swing)Dec 17 - U.S. gaming ratings will be mostly stable in 2013 as casino operators continue to focus on growth and generating shareholder returns, according to Fitch Ratings' 2013 U.S. Gaming Outlook. Negative ratings actions will be sparse as most operators have sufficient financial flexibility to offset stressors like lackluster gaming revenue growth and competitive pressures. "Casino balance sheets will remain highly leveraged next year as healthy casino operators continue to take advantage of low interest rates to facilitate leveraged share buybacks or dividends and potentially debt-funded M&A activity," says Michael Paladino, Senior Director of Gaming, Lodging and Leisure ratings at Fitch. "While we are cautious about these policies, Boyd Gaming and Caesars Entertainment are the only two issuers Fitch has on Negative Outlook. Some of the recent increased dividend activity was likely accelerated due to the pending fiscal cliff." Fitch does not expect significant improvements in U.S. gaming revenues in 2013, with low positive growth expected in stronger markets like the Las Vegas Strip. Growth in Atlantic City could be positive for the first time since 2006, despite damage caused by Hurricane Sandy; however, Fitch's outlook on the market remains negative, as the region's competitive landscape will continue to intensify beyond the recently opened Revel property. With liquidity and balance sheets generally on sound footing, many issuers will contend with additional competition due to expansion, continuing the trend seen throughout 2012. Competition for new gaming licenses remains intense in the U.S. and abroad, so there is incentive to maintain a strong financial profile. However, equity shareholders will pressure companies to generate returns in the absence of adequate organic growth prospects and new property openings. As a result, financial policy decisions may impact credit quality, particularly for companies that maintain a high degree of financial flexibility. Las Vegas Sands Corp. and Wynn Resorts Ltd. both have significant development plans and are among the issuers to recently issue special dividends as growth from new casino development remains a few years away. In addition, Fitch expects states with recently expanded gaming laws like Rhode Island and Maryland to impact existing casinos in the area, including Connecticut's tribal casinos. New and expected casino openings in Ohio, Pennsylvania, Louisiana and Massachusetts will also create additional competition in these areas over the next several years. The fiscal cliff remains the largest near-term risk to gaming revenues across the country as material improvements in revenue are closely tied to the nation's recovery. However, if the fiscal cliff materializes, ratings would largely depend on individual issuers' financial policy changes, as many have adequate free cash flow to adjust. The report, '2013 Outlook: U.S. Gaming,' is available at 'www.fitchratings.com'. Additional information is available at 'www.fitchratings.com'.
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