MGM Resorts International, (NYSE: MGM), successfully issued its most recent senior notes to raise $750m of capital.
The $750m offering was made at par at 6.500% and due 2032. MGM Resorts intends to use net proceeds of this offering to repay existing debt, such as its 6.750% senior note due in 2025.
According to its announcement, “the company may also invest the net proceeds into short-term, interest-bearing account, securities, or other similar investments”.
In the case of bankruptcy, a senior note will be given priority over all other obligations. Senior notes are less risky and pay a lower rate of interest.
These notes will be senior unsecured general obligations issued by MGM. In the event that MGM is liquidated, holders of senior unsecured notes will not be able to recover their principal or interest.
What is the current market rating of MGM Resorts senior notes?
Fitch Ratings, along with Moody’s & Standard & Poor’s, is part of the “big three” credit rating agencies.
Fitch rates MGM senior unsecured bonds with a rating of ‘BB -‘/’RR4. The company’s outlook is “stable”.
Fitch says that the rating is a reflection of MGM’s leverage between mid-5x and low-7x EBITDAR. The agency believes that the rating is in line with MGM’s “conservative” financial policy.
Fitch highlights MGM’s “robust liquid position”. MGM has “sized, a strong position in the Las Vegas market and diversified its regional markets” as a result.
China and Las Vegas successes drive growth in 2023
MGM Resorts reported an increase of revenue year on year for the 2023 fiscal year. The company’s business both in China and Las Vegas had record-breaking performances.
During what was another busy year for MGM, group revenue in 2023 amounted to $16.20bn (PS12.85bn/EUR15.12bn). The group revenue in 2023 was $16.20bn (PS12.85bn/EUR15.12bn), 23.7% higher than the year before, due to growth on two major markets.
MGM’s primary revenue source is Las Vegas, where revenues are up 4.8% annually. The impact of the major events and The Cosmopolitan’s acquisition in May 2022 helped to boost this. The first Formula One race was held in November 2023.
MGM China, however, reported the highest growth in 2023. MGM attributed this to the lifting of Covid-19 restrictions that had affected its performance in 2020.
MGM reported a decline in Regional Operations, which was offset more than adequately by the growth of “management and operations”. BetMGM is a joint venture between Entain and MGM that has achieved its full-year goals, expanded beyond the US, by going live on the UK.
MGM reported a total of $4.59bn in adjusted full-year EBITDAR. The operating profit also increased by 31.4%, to $1.89bn.
MGM Resorts’ future plans in New York, Osaka and elsewhere
MGM plans to expand into New York, US and Osaka, Japan as part of its 2024 expansion plan.
MGM revealed its plans to convert its Empire City Casino, located in New York City, into a commercial casino. The BetMGM Sportsbook & Lounge, restaurants and entertainment venues are also planned.
The project depends on MGM being able to secure one of three commercial full casino licenses that are currently available in New York. These licences are expected to be awarded in the next few months after the bid process began earlier this year.
Bill Hornbuckle, CEO of MGM, hopes to have the request for proposals approved by the end the year.
Hornbuckle stated that “we anticipate submitting the full application to government before the end of the year, with a quick decision following.” We’re hoping that something will be awarded by 2024. Unfortunately, we do not know anything more.
In Osaka, the certification of building an integrated gaming resort was completed in September. MGM has partnered with Orix Corporation. The project was approved by the Japan Ministry of Land, Infrastructure, Transport and Tourism. Hornbuckle stated that MGM will begin early construction in 2025 with an aim to open in 2030.
