Operator News

US – Foxwoods and Mohegan Sun well positioned for Springfield takeover

By Phil - 23 April 2018

Connecticut’s two tribal casino operators; Foxwoods Resort Casino and Mohegan Sun, would be well positioned to take over MGM Resorts International’s new Springfield casino should the Las Vegas-based operator decide to move on a rumoured takeover of Wynn Resorts’ troubled casino Wynn Boston Harbour in Massachusetts.

Massachusetts gaming law states that any operator can only own one casino in the state and with the Boston licence perceived as providing a more profitable catchment area, MGM is reportedly looking at taking the casino off Wynn’s hands. Massachusetts casino legislation does allow for a transfer of a casino license. The Boston licence has caused controversy following allegations of sexual misconduct from former Wynn leader Steve Wynn. Whilst he has since resigned from his position within the company and sold all his shares, there have been vociferous calls for the Wynn brand to be removed from the casino. The Springfield licence has caused controversy in neighbouring Connecticut where tribal operators have expressed concern over it eating into the same market as their casinos. They have united in attempts to bring a casino close to the border to block any migration of customers.

Alex Bumazhny, a senior director at Fitch Ratings in New York, said: “Unless the gaming act is amended, MGM wouldn’t be able to have both Boston Harbor and Springfield. The gaming act appears pretty clear on the one casino per operator.”

John DeCree, Analyst at Union Gaming in Las Vegas, believes any transfer in ownership in Boston could cause a merry-go-round of ownership. He said: “We believe some combination of Mohegan Sun/Foxwoods and a [real estate investment trust] would make the most sense for Springfield. It would eliminate an immediate competitive threat to the Connecticut casinos and offer a growth opportunity without development risk. Mohegan Sun suggested they would invest in new projects where there could be a rapid return in capital. An imminent opening casino in Springfield (September, 2018) would fit this parameter.”

Mr. DeCree explained that MGM Springfield ‘was a great fit for MGM when the license was awarded in 2014, but MGM is a vastly different company today.’

“In 2014, MGM’s total leverage was six times and the company generated $1.5bn of domestic,” he said “Today, MGM’s balance sheet is 4.5 times leveraged and going below four times in a hurry. The company now generates over $2.5bn of domestic cash flow and has significantly expanded its presence on the East Coast with MGM National Harbor and The Borgata. As a substantially larger enterprise, we believe MGM is a good fit for Boston.”

Frank Fantini, Chief Executive of Fantini’s Gaming Report, added: “These decisions start to enter the realm of politics. The very reason the tribes might be motivated is the very reason Massachusetts regulators and Massachusetts policymakers might not want to see them get it. Massachusetts doesn’t “want someone who has a built-in conflict of interest because they are trying to protect their flagship properties in a neighbouring state. Not to mention how upset the Connecticut legislators who passed a bill and went through all that turmoil to let them build that casino in East Windsor.”

Cody Chapman, a spokesman for Mohegan Sun, one of Connecticut’s two tribal casinos, explained their position. “We are able to share at this time that like everyone in the industry, we are watching what happens in Massachusetts closely,” she said.
Andrew Doba, a spokesman for Foxwoods-Mohegan Sun partnership in East Windsor, MMCT Venture LLC, added: “We’re not going to comment on rampant speculation. Our concern has been and will continue to be to preserve Connecticut jobs and revenue.”
Springfield City Council President Orlando Ramos still believes though that the $960m MGM Springfield will be completed as legislation states that neither MGM nor any five per cent owner can transfer an interest in the project without permission from local government.

“There are a lot of provisions in place where it wouldn’t be financially feasible for them to just walk away. Because we have such a host community agreement and such strong state legislation I’m not concerned about the possibility of them walking away from this project,” he said. “MGM has kept their promise to the City of Springfield and they’re committed to building here and operating here.”

MGM has remained tight-lipped on any Boston interest.

Debra DeShong, Senior Vice President of global corporate communications and industry affairs at MGM Resort said: “We remain committed to the opening and success of MGM Springfield.”