Fitch: U.S. Gaming Stable in 2013 as Companies Focus on Shareholders and
NEW YORK -- December 17, 2012
Link to Fitch Ratings' Report: 2013 Outlook: U.S. Gaming (Return Generation in
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 fiscal cliff."
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
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
Additional information is available at 'www.fitchratings.com'.
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Michael Paladino, +1-212-908-9113
One State Street Plaza
NY, NY 10004
Alex Bumazhny, +1-212-908-9197
Alyssa Castelli, +1-212-908-0540
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