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Mohegan INSPIRE faces potential loan defaults amid operational challenges

The slower-than-expected ramp-up of the $1.6 billion Mohegan INSPIRE, an integrated resort in South Korea that debuted in November 2023, is raising concerns about the company’s financial stability. Potential loan defaults suggest deeper operational issues.

High operating expenses tied to non-gaming facilities, such as the 15,000-seat arena, multi-purpose indoor water park, large-scale food court, and MICE facilities, along with underwhelming gaming revenue, may have contributed to a negative aggregate cash flow from both gaming and non-gaming segments at the Mohegan INSPIRE Entertainment Resort.

According to the latest financial results for the September quarter, Mohegan INSPIRE’s net revenue was just above $62 million, which is less than that of the company’s other non-US property, Niagara Resorts, which generated over $63 million in the same period. It is important to note, however, that the scale of Niagara Resorts – located in Canada next to Niagara Falls – is not comparable to Mohegan INSPIRE, as Niagara Resorts has a much smaller scale (with 374 room hotel versus 1,275 room hotel facilities in Korea’s Mohegan INSPIRE).

Despite the similar net revenue, capital expenditures for the two international properties under the Mohegan Tribal Gaming Authority show a significant difference. In the September quarter, Mohegan INSPIRE’s capital expenditures totaled more than $12.6 million, more than three times the $4.1 million spent by Niagara Resorts over the same three-month period.

Regarding the gaming performance of the international units, which includes both Mohegan INSPIRE and Niagara Resorts, gaming revenues were $82.7 million in the June quarter. By the September quarter, however, gaming revenues had decreased to $58.4 million. Meanwhile, casino visitation data show a steady increase throughout the year, with the number of visitors rising from 10,771 in February 2024 to 32,043 in September 2024.

INSPIRE Entertainment Resort, Aurora

Loan defaults

The Mohegan Tribal Gaming Authority, the parent entity of Mohegan INSPIRE, has disclosed upcoming debt maturities and an anticipated default on its Korea Term Loan in its FY24 annual report. The company is also facing litigation from the main contractor involved in the development of its South Korea property.

The company has stated that it plans to refinance a separate KRW1.04 trillion ($704 million) Korea Credit Facility, which is set to mature in November 2025. It warned that, without this refinancing, it may not have the liquidity to meet its debt obligations when due, raising concerns.

A gaming expert, who requested to remain anonymous, told AGB that both the gaming and non-gaming segments are likely losing money, leading to negative aggregate cash flow. This situation makes it impossible for the company to service its debt, forcing it to cut operating expenses, which could impact service quality. Further cost-cutting may include reductions in SG&A (Selling, General, and Administrative Expenses) and salaries, potentially leading to employee attrition.

Mohegan INSPIRE Entertainment Resort, Mohegan, Incheon

The resort’s financial struggles are further highlighted by its negative EBITDA. This worsening financial situation makes it highly likely that the company’s loan facility will default, which could result in the seizure of assets at Mohegan INSPIRE. 

Adding to the pressure, the parent company is facing its own liquidity issues and appears unable to provide the necessary financial support to resolve the crisis. To make matters worse, Mohegan INSPIRE is embroiled in a lawsuit with construction companies over outstanding payments.

As of September 30th, the Korea Term Loan had a face value of approximately $441.8 million, with a book value of about $351.9 million, reflecting a discount based on an imputed interest rate of 25.7 percent. The loan is scheduled to mature in 2027.

At the end of September 2024, Mohegan Gaming’s long-term debt had a face value of just over $3.14 billion, with a book value nearing $2.96 billion. This includes a separate Korea Credit Facility, which matures in November this year. The Korea Credit Facility has a face value of $761.6 million and a book value of $738.5 million.

Viviana Chan
Viviana Chanhttps://agbrief.com/
Viviana Chan is an editor, interpreter, and journalist. With over a decade of experience, she writes in English, Chinese, and Portuguese. Viviana started her career in Macau-based newspapers, where she became passionate about the region's social, financial, and cultural development. Her writing focuses on the economy, emerging industries, gaming development, political affairs, and cross cultural-exchange in the business and cultural domains. She is avid for news and eager to discover and cover stories that generate public relevance.

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