Fitch Ratings Inc is once again giving an issuer default rating (IDR) for casino developer MGM Resorts International and its unit, MGM China Holdings Ltd, assigning a ‘BB-’. The ratings agency said on Monday that the casino group’s outlook was “stable”, reflecting “Fitch’s expectation that MGM’s leverage will remain stable, and that liquidity is sufficient to fund future growth opportunities”.
Fitch had withdrawn MGM’s IDR in May 2022, citing “commercial reasons”.
In its Monday update, the institution said it observed a “strong reduction” in leverage at the MGM group, with it able to reduce its earnings before interest, taxation, depreciation, amortisation, and restructuring or rent costs (EBITDAR) leverage “from 8.4x in 2021 to 5.5x in 2023”.
“EBITDA leverage, which excludes leases from debt, improved from 8.6x to 2.8x over the same period through the application of free cash flow and asset sales proceeds to debt reduction,” added Fitch.
MGM China runs in Macau the casino-resort properties MGM Macau (pictured) and MGM Cotai.
“The continued rebound in Macau for both MGM properties should support further near-term growth,” stated Fitch.
But it added: “These positive factors are offset by the company’s active development plan, earnings volatility from high-end play in both Las Vegas and Macau, increasing cost pressure, and lack of ownership of its properties, which could affect financial flexibility during weaker economic conditions.”
The ratings agency said it did “not expect further material debt reduction over the forecast horizon,” and projects EBITDAR leverage “in the 5.0x-5.5x range”.
“Future free cash flow generation and excess cash should allow for funding of future growth opportunities and share repurchases,” it added.
MGM Resorts is developing Japan’s first casino resort, to be located in Osaka and scheduled to open in 2030. The group has also mentioned the pursuit of an upstate licence in New York in the United States, and a non-casino hotel scheme in Dubai in the United Arab Emirates.
Separately on Monday, MGM Resorts said it had priced a public offering of US$750.0 million in aggregate principal amount of 6.500-percent senior notes, due 2032. The transaction is expected to close on April 9, it added.
The casino firm said it intends to use the net proceeds from the offering “to repay existing indebtedness, including its outstanding 6.750-percent senior notes” due in May 2025.
CBRE Capital Advisors Inc said in a Monday memo that MGM “has good credit momentum, with healthy operating fundamentals domestically and strong market share gains at MGM China”.
“We commend the timely refinancing ahead of the May 2025 maturity at the MGM domestic box, in light of MGM China having US$750 million maturing in two months but yet to be refinanced, though ample revolver capacity to address it,” wrote analysts Colin Mansfield and Connor Parks.
The CBRE team also said MGM China’s recent announcement of special and final dividends was “somewhat a surprise to the market,” but that the institution “had anticipated MGM China having the capacity for distributions resuming in 2024.”
MGM China said last week it was terminating a US$750-million revolving loan facility made available by MGM Resorts amid the Covid-19 pandemic, as it is “not commercially necessary” now.
Last week, Moody’s Investors Service Inc said it had updated the credit outlook for MGM China to ‘stable’ from ‘negative’. On Monday, the institution said MGM Resorts latest refinancing exercise was “leverage neutral, and pushes out a portion of the company’s upcoming maturities”.
BY: 슬롯머신