MGM Resorts raises $750m via senior notes
The offering, totalling $750m, was issued at par and at a rate of 6.500%, due in 2032. MGM Resorts (MGM) intends to use the net proceeds from the offering of the notes to “repay existing indebtedness, including its outstanding 6.750% senior notes due 2025”.
As per its announcement, the company also “may invest the net proceeds in short-term interest-bearing accounts, securities or similar investments”.
A senior note is a form of a bond that will take precedence over other debts in the event of bankruptcy. As they carry a lower degree of risk, senior notes pay lower rates of interest than other bonds.
The notes being offered will be general unsecured senior obligations of MGM. This means that in the event of liquidation, the holders of the unsecured senior notes may not recoup their principal and interest in full.
How does the market rate MGM Resorts’ senior notes?
Fitch Ratings is one of the “big three” credit rating agencies alongside Moody’s and Standard & Poor’s.
In analysing MGM’s bonds, Fitch assigns a ‘BB-‘/’RR4’ rating to MGM’s senior unsecured notes. This gives the company a “stable” outlook.
According to Fitch, the rating reflects MGM’s mid-5x EBITDAR leverage. In the agency’s view, it is commensurate with MGM’s “conservative financial policy”.
Fitch also highlights MGM’s “robust liquidity position”. This accounts for MGM’s “scale, strong competitive position and diversification in its Las Vegas and regional markets”.
China and Las Vegas success drives growth in 2023
MGM Resorts posted a year-on-year increase in revenue for its 2023 financial year. This followed record performances by its business in both China and Las Vegas.
During what was another busy year for MGM, group revenue in 2023 amounted to $16.20bn (£12.85bn/€15.12bn). This was 23.7% ahead of the previous year amid growth across two key markets.
Las Vegas remains the primary source of revenue for MGM, with revenue here rising 4.8% year-on-year. This was helped by the acquisition of The Cosmopolitan in May 2022 and the impact of major events in the city. This included the inaugural Formula One race in November 2023.
However, MGM China reported the most growth during 2023. MGM put this down to the removal of all Covid-19 pandemic restrictions, with these having impacted its performance in 2022.
MGM noted some decline in its Regional Operations business, but this was more than offset by growth in the “management and other operations” segment. This includes BetMGM, the joint venture with Entain, which hit full-year targets and expanded outside the US by going live in the UK.
In total, MGM’s full-year adjusted EBITDAR at MGM amounted to $4.59bn. This also saw operating profit rise 31.4% to $1.89bn.
Future plans for MGM Resorts in New York and Osaka
A major part of MGM’s 2024 plans will see expansion into New York in the US and Osaka in Japan.
In November, MGM unveiled its vision to transform its Empire City Casino in New York into a full-scale commercial casino. Other planned amenities include a BetMGM Sportsbook and Lounge betting facility, restaurants and an entertainment venue.
However, the project hinges on MGM securing one of the three full commercial casino licences currently available in New York. The timeline for these licences will be announced in the coming months, with the bidding process having launched earlier this year.
The request for proposal process is under way, with MGM CEO Bill Hornbuckle hoping for approval before the end of the year.
“We anticipate submitting our full application to the government by the middle of this year with a decision expected shortly thereafter,” Hornbuckle said. “We’re hopeful that, by the end of 2024, something is awarded. But we don’t know any more, unfortunately.”
Meanwhile, certification for building an integrated casino resort in Osaka was finalised in late September. MGM is working with Orix Corporation, with Japan’s ministry of land, infrastructure, transport and tourism having already approved the project. Hornbuckle said MGM is on track to commence early construction efforts in 2025, with the aim of opening in 2030.