Fitch revises SJM Holdings outlook to negative on slow Grand Lisboa Palace recovery

Fitch Ratings has revised the outlook on SJM Holdings' long-term foreign currency issuer default rating (IDR) to negative from stable, citing weak earnings and slow cash flow recovery at its Grand Lisboa Palace (GLP) property.

The casino operator’s IDR and senior unsecured rating were affirmed at “BB-,” with the same rating applied to notes issued by subsidiary Champion Path Holdings, Fitch said.

The downgrade reflects growing uncertainty for the casino operator’s “deleveraging trajectory,” due to a slow showing from EBITDA and cash flow improvements from GLP, the agency said, adding that any further operational weakness would result in negative rating action.

SJM’s deleveraging path is running behind earlier expectations, with leverage forecast to rise to about 8 times in 2025 from 7 times this year, before gradually improving to 5 times by 2027.

The company’s second-quarter results underscored the challenges. GLP posted 1% quarter-on-quarter revenue growth and a 3% EBITDA margin, both below forecasts, while Macau’s gaming industry as a whole grew 8% year on year. Market share losses were attributed to new hotel openings and more aggressive promotions by rivals. Rising marketing and other operating costs also weighed on margins.

SJM is moving to restructure operations as satellite casinos close by the end of 2025, reallocating 458 tables and over 4,000 staff to its self-owned properties. The company plans to expand Casino Lisboa’s gaming floor and pursue acquisitions of sites such as Casino L’Arc and Ponte 16 to sustain self-operated venues.

Despite efforts to boost GLP’s mass-market appeal through improved transport links, food and beverage, retail, and event offerings, Fitch said the effectiveness of these measures in lifting market share remains uncertain.

SJM’s business profile continues to lag that of U.S.-based peers such as Wynn Resorts, MGM Resorts International and Las Vegas Sands, Fitch noted. Still, the agency expects the operator to deleverage over the medium term as it pays down debt from the GLP development and pandemic period.