Fitch Ratings has affirmed SJM Holdings' credit rating at "BB-" with a "stable" outlook, maintaining its position three notches into junk territory. This rating reflects the ongoing economic recovery in Macau while acknowledging the company's substantial debt from the Grand Lisboa Palace (GLP) development.

The company's high leverage stems from both the GLP expansion costs and COVID-19 pandemic impacts. Despite these challenges, SJM Holdings maintains a strong operational history in Macau and demonstrates conservative financial management.

SJM Holdings is actively working to reduce its debt burden, with projections showing a potential decrease in debt/EBITDA ratio from 6.9x in 2024 to 3.9x in 2026. This would position the company below Fitch's "negative sensitivity" threshold of 5x.

Macau's gaming market outlook remains positive, with the government projecting MOP240 billion in gross gaming revenue and 36 million visitors. SJM's capital expenditures are expected to average $193.1 million over the coming years.

The Grand Lisboa Palace continues to show promising growth, with market share reaching 2.6% in Q3 2024. Fitch expects this to increase to 3.0% in 2025, supported by:

• Improved connectivity
• Enhanced food and beverage offerings
• Expanded retail options
• New event programming
• Opening of a 50,000-capacity outdoor concert venue in early 2025

The property, which opened in July 2021, appears to be progressing toward its target of 5% market share, contributing to the company's overall financial recovery efforts.

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