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China – Fitch predicts 19 per cent revenue fall for MGM in Q4

By - 12 October 2020

Fitch ratings agency has given MGM China and MGM International’s US$750m public offering a negative outlook, reflecting the ‘risks and uncertainty the global gaming industry is facing from the pandemic,’ adding that it believes revenues at MGM’s Macau casinos will be 19 per cent down year-on-year.

MGM intends to use the net proceeds from the offering of the Notes for general corporate purposes, which could include refinancing existing indebtedness. Pending such use, the Company may invest the net proceeds in short-term interest-bearing accounts, securities or similar investments.

“The successful execution of this upsized offering at a favorable rate further solidifies our financial flexibility and demonstrates the continued confidence our investors have in our long-term business outlook,” said Corey Sanders, Chief Financial Officer and Treasurer of MGM Resorts International.

Based on 4Q19 results, the Las Vegas Strip, US Regional and Macau segments represented 47 per cent, 28 per cent and 23 per cent of MGM’s consolidated EBITDA, respectively.

Fitch said: “At this point, all of MGM’s assets are open. Fitch expects the Las Vegas recovery to take longer relative to the US Regional markets given the former’s greater reliance on air travel and group business. Macau should see improved visitation in 4Q20, with China restarting broad visa issuances in late September. Fitch is projecting marketwide revenue declines in the Las Vegas Strip, US Regional and Macau segments relative to 2019 of 48 per cent, 14 per cent and 19 per cent, respectively.

“Total revenues relative to 2019 levels are -59 per cent, -31 per cent, -14 per cent and – six per cent from 2020 through 2023, respectively. Near-term declines are greater for Las Vegas given its reliance on air travel and group business, as well as Macau given lingering albeit easing travel restrictions. MGM’s regional portfolio performs relatively stronger, as the properties rely mostly on drive-in visitation.”

Fitch is predicting a 19 per cent decline in revenues in Macau for the last quarter of the current year compared to last year’s performance.
It explained: “Macau should see improved visitation in 4Q20, with China restarting broad visa issuances in late September. MGM’s two properties in Macau provide global diversification benefits and exposure to a market with favourable long-term growth trends” it added.

“MGM China is strategically and operationally important to MGM, and MGM China does not have material ring-fencing mechanisms in its financing documentation that would limit MGM’s access to MGM China’s cashflows,” it added. “Fitch could revise the Rating Outlook to Stable when there is a greater degree of confidence in the gaming industry’s recovery trajectory and MGM’s ability to de-lever back to 6.0x adjusted gross leverage.”

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