Sands IG Credit Rating Buoyed by Singapore, Says Fitch

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

Fitch Ratings reaffirmed Las Vegas Sands’ (NYSE: LVS) credit rating at “BBB-,” which is the lowest level of investment-grade, maintaining a “stable” outlook. 

In a report released last Friday, the research firm highlighted the operator’s free cash flow potential and the robustness of Marina Bay Sands in Singapore as reasons backing the investment-grade rating. Nonetheless, sluggishness in Macau, where Sands China operates five casino hotels, was also noted.

"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 nearly two years past the reinstatement of its investment-grade ratings, which were downgraded to junk shortly after the coronavirus pandemic began. Sands’ strong credit rating is bolstered by a positive earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast, which enables the firm to lower its leverage. In February 2024, Fitch upgraded Sands to investment grade. 

Talking About Decreasing Leverage… 

Fitch projected that Sands will have an earnings before interest, taxes, depreciation, and amortization (EBITDA) leverage ratio of 3.5x, adding that “should leverage remain consistently below this threshold,” a ratings upgrade could occur. 

“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.

Fitch analysts observed that the gaming firm has a history of being cautious regarding balance sheet management, reinforcing its higher quality credit rating while possibly setting the stage for a future upgrade. Sands is recognized for effectively conveying leverage goals to investors. 

The ratings agency highlighted that although Sands is repurchasing its shares — which one analyst considers significantly undervalued — and aiming to increase its dividend, the generation of free cash flow should be sufficient to back those rewards for shareholders. Fitch stated that the gaming firm possesses sufficient cash to manage Sands China’s debt maturing later this year. 

Sands’ Financial Stability Showcased 

As a demonstration of the operator's financial reliability and capacity to obtain funds, Sands has recently secured $9 billion in financing for upgrades and growth at Marina Bay Sands. This represents one of the largest expansions of corporate credit in Singapore's history. 

Fitch noted that elements favorable for a possible upgrade "include enhanced leverage and greater geographic diversification." 

Sands currently operates six integrated resorts — five in Macau and one at Marina Bay Sands. The way to achieve geographic diversification is still unclear, but this initiative mainly revolves around the operator obtaining a gaming license for the New York City area, Texas potentially legalizing casino gaming, and a possible proposal for a casino resort in Thailand.