Gaming stocks fall on news of Macau growth

Despite an improved credit outlook for Wynn Resorts Ltd., its shares and those of competitor Las Vegas Sands Corp. fell Monday after the government of Macau said it's reviewing growth of the casino industry and that the six gaming operators there agree it "shouldn’t expand infinitely."

Wynn fell 2.9 percent to $65.88 and Las Vegas Sands was off 1.8 percent to $17.72.

Local reports said the Chinese gambling enclave is considering imposing limits on table numbers, removing gaming operations from residential areas and raising the age limit for entering casinos from 18 to 21.

Wynn Resorts Chairman and Chief Executive Steve Wynn told Bloomberg Television the plans to limit slot machines in residential areas and impose age restrictions on gambling will not hurt earnings at subsidiary Wynn Macau Ltd.

Age limits would have “absolutely no effect on us,” Wynn told Bloomberg Television. The restrictions are “a good idea,” he said.

“We don’t have slots in residential neighborhoods,” Wynn told Bloomberg. “Someone should be earning their own living before they think about gambling.”

Earlier Monday, a debt-rating company lifted its outlook on Wynn Resorts after the company raised $1.87 billion in an initial public stock offering of 25 percent of its Macau assets.

Fitch Ratings of New York said it revised the rating outlook for Wynn Resorts and its subsidiaries to positive from stable.

"The positive outlook also recognizes an improved operating outlook in Macau following relaxed travel restrictions that were recently implemented," Fitch said.

Wynn initially raised $1.63 billion with the IPO of Wynn Macau Ltd., but with exercise of an over-allotment option the total was lifted to $1.87 billion. The stock rose 6.9 percent Friday, its first day of trading.

Fitch affirmed Wynn's existing speculative-grade corporate credit ratings including the Wynn Resorts issuer default rating at "B+."

Fitch also assigned a "BB/RR2" rating to Wynn Las Vegas LLC's $500 million senior secured first mortgage notes due 2017 that were issued last week.

The equity issuance leaves Wynn with about $2.8 billion of available cash while last week's $500 million note issuance is leverage-neutral as the money will be used to repay outstanding bank debt while pushing debt maturities from 2012-13 to 2017, Fitch said.

Barbara Cappaert, an analyst at KDP Investment Advisors Inc., said in a report to investors last week that the recent equity and debt deals indicate "Wynn is amassing cash and liquidity" to finance further potential growth in Asia as well as the United States.

Wynn is among the bidders to redevelop the Aqueduct Racetrack in New York in a project that would involve the installation of 4,500 gaming machines there.

Fitch also noted growth possibilities for Wynn in its report.

"Although Wynn's strong liquidity profile and substantial cash balance provides resources for meaningful debt reduction, the company may instead choose to preserve cash to invest in potential growth opportunities," the company said.

For the second quarter ended June 30, Wynn reported revenue of $723.3 million, down from $825.2 million in the year-ago quarter as the recession pushed occupancy and room rates down in Las Vegas and table game win fell in Macau.

Net income of $25.2 million, or 21 cents per share, was down from $272 million or $2.42 a year earlier.