Sands IG Credit Rating Buoyed by Singapore, Says Fitch

• Sands still has an investment-grade rating at Fitch
• Marina Bay Sands viewed as a source of strength

Las Vegas Sands’ (NYSE: LVS) credit rating was reaffirmed at “BBB-“ — the lowest investment-grade mark —  with a “stable” outlook by Fitch Ratings.

In a report out last Friday, the research firm cited the operator’s free cash flow prospects and the strength of Marina Bay Sands in Singapore as factors supporting the investment-grade rating. However, lethargy in Macau, where Sands China runs five casino hotels, was also mentioned.

The company’s strengths include its scale, competitive positions, and robust free cash flow, offset by a heavy capital program and potential Chinese economic weakness,” said Fitch of Sands.

The operator is almost two years removed from having its investment-grade ratings restored after those marks were cut to junk soon after the onset of the coronavirus pandemic. Sands’ solid credit grade is supported by an improving earnings before interest, taxes, depreciation, and amortization (EBITDA) outlook, one that positions the company to reduce leverage. Fitch lifted Sands to investment grade in February 2024.

Speaking of Reducing Leverage…

Fitch forecast Sands will sport earnings before interest, taxes, depreciation, and amortization (EBITDA) leverage of 3.5x, noting that “if leverage sustainably falls below this level” a ratings upgrade is possible.

“LVS’s liquidity is strong, with $4.2 billion in cash and significant credit facility availability. Key risks include sustained high leverage and liquidity deterioration,” adds Fitch.

The ratings agency also noted that while Sands is buying back its stock — one analysts view as deeply undervalued — and looking to grow its dividend, free cash flow generation should be ample enough to support those shareholder rewards. Fitch added the gaming company has the cash on hand to service Sands China’s debt coming due later this year.

Sands Creditworthiness on Display

In a testament to the operator’s creditworthiness and its ability to procure capital, Sands recently landed $9 billion in financing for enhancements and expansion at Marina Bay Sands. That marks one of the biggest extensions of corporate credit in Singapore’s history.

Fitch said factors boding well for a potential upgrade “include improved leverage and increased geographic diversification.”

Sands currently runs six integrated resorts — five in Macau and Marina Bay Sands. How geographic diversification is attained remains to be seen, but that effort largely centers around the operator winning a New York City-area gaming license, Texas possibly approving casino gaming, and a possible bid for a Thailand casino resort.