Wynn Macau capex, weaker earnings temper CreditSights bond outlook

CreditSights Inc has maintained its “tactical” ‘outperform’ recommendation on U.S. dollar bonds issued by Macau casino operator Wynn Macau Ltd, despite weaker third-quarter earnings and an expected increase in capital expenditure in 2027. “From a relative value standpoint”, those bonds “are currently trading, on average, circa 58 basis points wider than U.S. ‘BB-‘ corporates with similar tenors, which we think looks attractive,” wrote analysts Nicholas Chen and David Bussey in a Friday note. The analysts nonetheless highlighted a “capital expenditure headwind for financial-year 2027” as a key factor behind the qualification of their recommendation as “tactical”. CreditSights said Wynn Macau Ltd’s total debt load was flat at US$5.8 billion as of September, relative to June, comprising US$4.7 billion in senior unsecured bonds and circa US$1.1 billion under a senior unsecured revolving credit facility, maturing in September 2028. The institution added that, owing to weaker third-quarter earnings before interest, taxation, depreciation, amortisation and rent (EBITDAR), it calculated that the Macau casino firm’s last 12 months’ gross and net leverage rations had “weakened slightly to 5.3 times and 4.3 times”, respectively, as of September, from 5.1 times and 4.2 times at the end of June. CreditSights observed: “Free cash flow also fell year-on-year though still positive at circa US$105.5 million during the quarter. “We do not envisage a material debt reduction by the company in the near term, and any leverage improvement would be largely driven by incremental EBITDAR. We expect free cash flow to remain positive in fourth quarter 2026.” But the CreditSights analysts stated that “against its high-yield-rated peers,” the Wynn Macau Ltd 2027 and 2028 maturities “trade about 14 basis points tighter” than Melco Resorts & Entertainment Ltd 2028s, “which is inside the historical spread differential between the two credits”. They added: “We also note that Wynn Macau [Ltd] is currently free from any buyout overhang.” The institution further observed, referring to the U.S. parent of Macau casino operator MGM China Holdings Ltd: “MGM Resorts [International] may have closed the door to a People Inc-takeover for good, but we still see some lingering event risk at MGM China, given that the parent remains open to a change of control transaction.” The CreditSights analysts said the “main headwind” for Wynn Macau Ltd was a capital expenditure ramp up expected from financial year 2027. The casino company runs Wynn Macau (pictured), on the city’s peninsula, and Wynn Palace in the Cotai district. The institution mentioned the expansion work at Wynn Palace – including The Enclave hotel tower, described previously by the casino group as a US$950-million, 432-suite project, and likely to open in early 2029 – and an entertainment centre and theatre. While these projects “would impact the company’s free cash flow generation,” the analysts said the spending was “not an unknown given that the company had already disclosed the financial-year 2027 capital expenditure during its fourth-quarter 2025 results in February 2026″. “We opine [this] has already been somewhat priced in by the market,” added the CreditSights team. For financial-year 2027, the management of parent Wynn Resorts had issued guidance for higher Macau capex of US$750 million to US$800 million, relative to 2026’s upper range of US$400 million.