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
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'.