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Research Announcement:

Moody's – US gaming forecast cut again as scope of coronavirus-related strains emerge amid weakening US economic environment

23 April 2020

New York, April 23, 2020 --

  • EBITDA to plunge 60% to 70% for the 12 months through March 2021
  • Forecast revision reflects lack of clarity regarding when casinos will reopen, and the likely limitations on casino utilization that will occur once these facilities reopen

Moody's Investors Service has further revised its outlook for the US gaming industry by slashing its 12-month forecast, as the scope of industry strains emerge amid a weakening US economic environment.

"As the coronavirus pandemic cuts an ever-deeper path of loss through the US economy, we expect EBITDA to plunge 60% to 70% for the 12 months through March 2021. We expect the EBITDA decline to be even more severe in calendar 2020, led by a severe drop in the second quarter when industry EBITDA will likely be negative," said Keith Foley, a Moody's Senior Vice-President.

"The US gaming industry faces a monumental, unprecedented crisis, with a long and painful recovery to follow. We expect that it will take 12 months for sector EBITDA to recover to about 30% of what was generated on an annual basis before the coronavirus pandemic struck. Overall, it will take a little more than 18 months for the industry to get back to generating just 60%, roughly, of 2019 levels," adds Adam McLaren, a Moody's Vice-President and Senior Analyst.

On March 12, Moody's had already cut its industry outlook to negative and drastically altered its EBITDA forecast to a decline of 10%-20% over a 12-month period, which stood in sharp contrast to the rating agency's previous call for 3.5% growth for 2020. Since March 12, more casinos throughout the US have temporarily closed through mandates by state and local governments in an effort to contain the spread of the coronavirus.

The highly discretionary and nonessential nature of consumer spending on casino gaming makes the sector extremely vulnerable to changes in regional, local and nationwide economic conditions as well as travel, which will all be hurt by coronavirus containment efforts. This second downward revision to Moody's forecast reflects the lack of clarity regarding when casinos will reopen, and the likely limitations on utilization that will occur once these facilities reopen.

Moody's believes customers will be slow to return, and it will likely take some time before companies will be able to ramp back up to normal business levels. Restaurants, bars and theaters in the casinos will likely operate at a more limited capacity once mandatory casino closures and stay at- home orders are lifted because of continued social distancing practices to prevent a renewed outbreak.

Protracted travel concerns also suggest that regional operators will likely rebound before the Las Vegas strip. When casino doors eventually reopen, customers will likely take time before they have the confidence to travel far, especially by air for leisure purposes.

Overall, Moody's expects conditions will improve in the second half of the year, based on an assumed reopening of facilities around the beginning of the third quarter. While earnings will increase meaningfully in 2021, Moody's expects EBITDA for the year will still be about 20% to 40% lower relative to 2019.

For more research and insight on the coronavirus (COVID-19) outbreak, please see http://moodys.com/coronavirus .

Subscribers can access the report, "Gaming — Casinos: US: Outlook Update: Sector EBITDA will plunge about 70% in next 12 months," at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1224714

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Keith Foley
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Adam McLaren
VP-Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Sean Cray
Associate Analyst
RRS
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Daniel Greszta
Associate Analyst
RRS
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
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JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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