Fitch Ratings Inc says gaming issuers, including casino operators Wynn Resorts Ltd and MGM Resorts International, “have generally good liquidity” that addresses most near-term maturity needs.
“We do not anticipate any major liquidity-driven defaults in the near term despite the weakened state of the U.S. high-yield market,” the ratings agency said in a report on Friday.
“Issuers with the biggest development pipelines, notably Wynn Resorts and MGM [Resorts] International, have pre-funded their needs,” Fitch added.
The two gaming firms have subsidiaries in Macau: Wynn Resorts controls Wynn Macau Ltd; and MGM Resorts has a 51-percent stake in MGM China Holdings Ltd
Wynn Macau is scheduled to open its US$4.1-billion Wynn Palace in Macau’s Cotai district on June 25. The parent company is also moving forward with a US$1.7-billion casino project in the city of Everett on the outskirts of Boston in the United States.
Fitch said Wynn Resorts “has ample liquidity” to fund these new projects.
“As of September 30, 2015, Wynn had US$2.8-billion of liquidity, not including US$875-million of… loans for its Wynn Everett project and US$250-million of available-for-sale securities. This liquidity plus approximately US$600-million of discretionary run-rate annual FCF [free cash flow] is enough to address Wynn’s US$6-billion development pipeline,” said the ratings house.
Fitch added that Wynn Resorts “has no near-term maturities” and its only current financial covenant is for the Macau credit facility, which excludes the debt at Wynn Resorts.
MGM Resorts’ outlook
MGM Resorts has US$2.2-billion in maturities – excluding senior secured debt – leaving the casino firm with about US$5.4-billion in funding needs, according to Fitch. The ratings agency estimates – as of January 2016 – MGM Resorts’ development capital expenditure commitments through 2018 at US$3.2 billion.
Macau casino operator MGM China in November held a topping off ceremony for its under construction new resort on Cotai. The HKD24-billion (US$3.1-billion) MGM Cotai (pictured) is scheduled for a fourth quarter 2016 opening. Its quoted budget excludes land costs and capitalised interest.
MGM Resorts broke ground in March on its MGM Springfield project in Massachusetts, in the United States. The scheme currently has a price tag of about US$950 million. The company’s development pipeline also includes the MGM Arena project on the Las Vegas Strip in Nevada and the MGM National Harbour in Maryland, also in the U.S.
Fitch said in its Friday report: “ [MGM Resorts'] Macau’s needs are fully funded with a US$1.45-billion undrawn revolver. Assuming MGM’s U.S. revolver gets extended, U.S. needs can be met with US$2-billion of available liquidity and US$600-million to US$900-million per year of domestic FCF, including CityCenter and Borgata joint venture distributions, as well as US$150-million to US$350-million in dividends from MGM Macau to MGM [Resorts] per year.”
MGM Resorts’ liquidity “could become a moot point” if the company moves forward with its plan to contribute its assets to MGM Growth Properties LLC, the firm’s planned real estate investment trust, a type of investment vehicle commonly known as a REIT.
The U.S.-based casino operator announced in October it would create a publicly traded REIT to which it plans to contribute 10 real estate assets, all located in the U.S. The firm appointed two executives earlier this month to lead the real estate investment trust.
“Under those circumstances, we believe MGM [Resorts] will repay its 2016 maturities and amend its credit facility,” added Fitch.
In Friday’s report, Fitch listed U.S.-based casino operator Mohegan Tribal Gaming Authority, known as Mohegan Sun, and gaming and lottery supplier Scientific Games Corp as “financially weaker issuers with intermediate maturities”. The ratings agency said it believed both issuers have the financial flexibility to handle their obligations.
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