MGM China Holdings Limited, a majority-owned subsidiary of MGM Resorts International, will issue $500 million in new senior unsecured notes, rating agency Moody’s Ratings stated.
The net proceeds from the new notes will be used to pay down a portion of MGM China’s existing revolving credit facility and for general corporate purposes.
MGM China has not yet publically announced the notes issuance, having only issued a dispatch announcing plans for an international offering of senior unsecured notes to professional investors only.
The gaming operator recently drew on the revolving credit facility to repay its $750 million notes which matured in May 2024.
In a dispatch, rating agency Moody’s Ratings assigned a rating of B1 to the proposed notes, adding that this refinancing will not increase the company’s overall debt levels, as the funds will replace existing debt that was recently repaid. A Moody’s B1 rating represents a ‘speculative and high credit risk investment’.
The rating agency cited the company’s large scale, strong Las Vegas presence, and favorable long-term outlook for its Macau operations as strengths. However, MGM’s high leverage, including significant lease obligations, remains a constraint on its rating.
‘The stable outlook for both MGM Resorts and MGM China reflects the strong performance of the company’s US regional and Las Vegas casino resorts, as well as a recovery in Macau,’ the rating agency pointed out, adding that the companies maintain good liquidity with substantial cash balances and available credit facilities.
Factors that could lead to an upgrade include consistent positive free cash flow and lower debt levels, while downgrades could occur if EBITDA declines or liquidity deteriorates.
MGM China reported a record high adjusted EBITDA of HK$2.5 billion ($320 million) in the first quarter of 2024, up 77.3 percent year-on-year and 155 percent from the first quarter of 2019.
The company has proportionally benefited the most from Macau’s recovery, with its gross gaming revenue share rising from 9.5 percent in 2019 to more than 17 percent this year.
