Fitch Ratings has reaffirmed SJM Holdings' credit rating at "BB-" with a "stable" outlook, maintaining its position three notches into junk territory. Despite Macau's ongoing economic recovery, the casino operator faces challenges from high debt levels accumulated during the Grand Lisboa Palace (GLP) development.

The rating reflects SJM's strong operational history in Macau but acknowledges current leverage concerns. The company aims to reduce its debt/EBITDA ratio from 6.9x in 2024 to 3.9x by 2026, which would position it below Fitch's negative sensitivity threshold of 5x.

Supporting factors for SJM's financial outlook include:

• Expected moderate growth in Macau's gross gaming revenue (GGR)
• Projected visitor increase to 36 million
• Manageable capital expenditures averaging $193.1 million
• Continued ramp-up of Grand Lisboa Palace

Grand Lisboa Palace's performance shows promising signs, with market share reaching 2.6% in Q3 2024. Fitch expects this to increase to 3.0% in 2025, driven by:

• Improved connectivity
• Enhanced food and beverage offerings
• Expanded retail options
• New 50,000-capacity outdoor concert venue opening in early 2025

The property remains on track to achieve its long-term goal of 5% market share, contributing to SJM's overall debt reduction strategy and financial stability.

While maintaining a "BB" rating indicates some default risk under adverse business conditions, SJM's established market position and focused debt reduction efforts support its stable outlook.

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