Fitch downgrades MGM on reduced financial flexibility, coronavirus
Fitch Ratings has downgraded MGM Resorts International’s and MGM China Holdings’ issuer default ratings as well as their unsecured debt due to “decreased financial flexibility following the recent sale-leaseback transactions as well as the severe disruption to global gaming caused by the coronavirus outbreak.”
Fitch also revised the firms’ rating outlook from stable to negative.
They explained that “the sale and leaseback of Bellagio and MGM Grand, the company’s last two flagship Las Vegas Strip assets, reduce MGM’s liquidity levers vis-à-vis ability to monetize assets and increase MGM’s rent obligations to unaffiliated parties, most notably Blackstone Real Estate Income Trust.”
Fitch also cited “the unknown depth and duration of the coronavirus disruption” and the increased cash burn that this would entail.
However, the ratings agency also noted that “MGM is well positioned from a liquidity standpoint to weather the near-term cash burn, which Fitch anticipates will be funded with cash on hand including the recent asset sale proceeds.”