Fitch Ratings has recently revised the credit standing of SJM Holdings Ltd, a prominent casino operator listed in Hong Kong. The long-term foreign-currency issuer default rating was decreased to ‘B+’ from ‘BB-’, now accompanied by a "stable" outlook. This adjustment highlights concerns regarding the firm’s slower-than-anticipated deleveraging efforts and a less robust earnings recovery. A ‘B+’ classification by Fitch denotes a “highly speculative” fundamental credit quality.
Simultaneously, the agency has reduced the rating on senior unsecured debt and the outstanding notes distributed by SJM's subsidiary, SJM International Ltd, to ‘B’ from ‘BB-’. According to the institution, "The downgrade reflects Fitch’s view that SJM Holdings’ leverage trajectory is no longer consistent with its previous rating level," as stated in a memo issued on Friday.
The prediction now suggests that the casino company’s leverage will exceed the thresholds pertinent to the ‘BB-’ rating level over the following years amid slower EBITDA growth.
Financial Struggles and Recent Developments
SJM Holdings recently reported a net loss of approximately HKD62 million (around US$7.9 million) for the first quarter, a stark contrast to the HKD31 million profit recorded a year prior. This performance downturn came alongside a year-on-year net revenue contraction of 22.8 percent, totaling HKD5.36 billion. During the first quarter, the casino group experienced a 4.3 percent decline in group-wide adjusted EBITDA, falling to HKD917 million compared to the same period the prior year.
Importantly, this quarter was the first in which SJM Holdings operated entirely without any satellite casinos. Earlier in the month, Moody’s Ratings also downgraded SJM Holdings’ corporate family rating to ‘B1’ from ‘Ba3’, adjusting the outlook from ‘negative’ to ‘stable.’ Fitch's latest report anticipates SJM Holdings’ EBITDA leverage will remain elevated, reaching 7.8 times in 2026 and 6.5 times in 2027, an encouraging reduction from over 9 times in 2025 but still notably above the agency's 5.0 times downgrade threshold.
Future Outlook and Strategic Adjustments
Despite these challenges, Fitch foresees potential for the casino group to incrementally decrease its debt in the medium term, aided by enhanced operational performance and progressively improving free cash flow. Fitch's projections see adjusted EBITDA at HKD3.7 billion for 2026 and increasing to HKD4.2 billion by 2027, compared to HKD3.0 billion in 2025. Key strategies to facilitate earnings enhancement include increasing margins post-Macau's low-margin satellite casino system dissolution.
SJM Holdings aims to capture more gaming business through ownership of self-operated properties, such as the newly acquired L’Arc Casino. Additional savings could result from redeploying staff and natural attrition amid the satellite casino shift. However, the company’s market position has deteriorated. SJM Holdings' market share in the first quarter of 2026 fell to 9.6 percent, undercutting Fitch's previous forecast of 10.7 percent, primarily due to satellite casino closures.
The underperformance at the Grand Lisboa Palace complex is another area of concern, with non-rolling gaming volumes at the Cotai site showing slower growth and even a slight decline early this year. Fitch assumes that Macau’s casino gross gaming revenue will grow by 5 percent in 2026 and continue with minimal annual increases thereafter.
SJM Holdings’ revenue is expected to diminish by 17 percent in 2026, with a return to growth following that year. Despite liquidity still being deemed "adequate," thanks to the refinancing of bonds due this year and the securing of additional syndicated loans, further caution is advised. The company closed 2025 with HKD2.0 billion in available cash, excluding cage cash, and HKD3.6 billion in undrawn revolving facilities.
Source: Fitch cuts SJM Holdings rating, cites slower-than-expected deleveraging, GGRAsia, May 25, 2026.
Posted by Wizard
May 25 2026
May 25 2026
Comments
No comments for this article.