Following MGC Encore Boston Harbor Decision, Moody’s Lifts Wynn Resorts Outlook to ‘Positive’

Posted on: May 2, 2019, 02:15h. 

Last updated on: May 2, 2019, 02:18h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Moody’s Investors Service — the bond rating division of one of the largest global credit rating agencies — boosted its outlook on Wynn Resorts, Ltd. (WYNN) to “Positive” from “Negative” after the company agreed to pay a $35.5 million fine levied by the Massachusetts Gaming Commission (MGC) to maintain its operating license for its upcoming Encore Boston Harbor casino.

Moody’s credit rating for scandal-ridden Wynn Resorts has taken a turn for the better since the Massachusetts Gaming Commission, seen here, determined the gaming operator’s Boston Harbor casino licensing fate. (Image: Bisnow/Cameron Sperance)

Earlier this week, the MGC imposed the fine on Las Vegas-based Wynn Resorts for failing to disclose sexual misconduct allegations against founder and former CEO Steve Wynn when the company was trying to win the rights for the Boston casino in 2013. Wynn Resorts will pay the fine — it has 30 days to do so — and move forward with plans to open Encore Boston Harbor in late June.

Dressing Suits Down

The MGC fine includes a $35 million fine to Wynn resorts, and a more direct $500,000 fine to current Wynn CEO and President Matthew Maddox, along with a requirement for executive coaching and training on select management issues. The commission held Maddox accountable in its decision for “his clear failure to require an investigation” following a spa employee’s complaints regarding Mr. Wynn’s alleged transgressions, which the ex-CEO has repeatedly denied.

Additionally, the MGC is requiring that Wynn Resorts hire an independent counsel to review internal policies and procedures and that the company’s chairman and CEO roles be separated for the duration of its 15-year Massachusetts gaming license. Philip Satre currently occupies the role of non-executive chairman of Wynn’s board.

Pleased to Come to Boston

With the grueling commission review behind the gaming operator, it can finally focus on its projected June 23 opening of the $2.6 billion property.

The outlook revision to positive reflects the MGC’s decision to maintain WYNN’s gaming license in the State thereby alleviating Moody’s concern regarding WYNN’s ability to own and operate Encore Boston Harbor,” said Moody’s Senior Vice President Keith Foley in a recent note.

“The MGC’s decision, combined with Moody’s expectation that Boston Encore Harbor will ramp up quickly and perform well over the long-term strongly suggests that WYNN’s credit profile will improve.”

The ratings agency also affirmed Ba3 ratings — indicating a somewhat speculative long-term outlook —? on Wynn’s corporate family and a senior secured bank facility. A rating of Ba3 is non-investment grade on the Moody’s ratings scale.

The Encore Boston Harbor, located less than five miles from Logan International Airport, will have 5,500 staffers and is expected to attract 8 million visitors per year: more than the Red Sox, Celtics, Bruins, and Patriots combined, according to Wynn.

The rating agency’s new Positive outlook on Wynn “also considers Moody’s continued favorable long-term revenue and earnings prospects for the company’s Macau, China, and Las Vegas Strip, Nevada casino resort properties,” Moody’s said in its note.

Shares Bounce Back

Shares of Wynn Resorts, the second-largest U.S. casino operator by market capitalization, are up nearly 48 percent year-to-date.

While Wynn is viewed as one of the leaders in high-end Las Vegas gaming resorts, much of its cash flow comes by way of its properties in Macau, the world’s largest gambling mecca in terms of casino revenues.

Even with the opening of Encore Boston, Moody’s sees Wynn’s Macau revenue concentration lingering, meaning it could be awhile before the company’s debt attains investment-grade ratings.

“Key credit concerns include WYNN’s limited diversification despite the fact that it is one of the largest U.S. gaming operators in terms of revenue. WYNN’s revenue and cash flow will remain heavily concentrated in the Macau gaming market, even after Encore Boston Harbor opens,” said Moody’s.

“We also expect that WYNN will be presented with and pursue other large, high-profile, integrated resort development opportunities around the world. As a result there will likely be periods where the company’s leverage experiences periods of increases due to partially debt-financed, future development projects.”