The parent of Macau casino operator MGM China Holdings Ltd announced “preliminary” first-quarter results on Thursday. The full results for the three months to March 31 are due to be filed on April 30.
United States-based MGM Resorts International used the pre-announcement in support of a US$750-million offer of 6.75-percent senior notes due in 2025.
The parent estimated the Macau unit’s first-quarter net revenues were just under US$271.9 million, down 63 percent from the prior-year quarter number of US$734.2 million.
The Macau unit, which runs MGM Macau on the city’s peninsula and MGM Cotai (pictured) in the Cotai casino district, is expected to have a nearly US$22.0-million quarterly loss in adjusted earnings before interest, taxation, depreciation, amortisation, and restructuring or rent costs (EBITDAR), compared to a positive US$192.8 million in the prior-year period.
The result comes against the background of the Covid-19 pandemic that has seen shutdowns or severe decline in casino business across the world.
Macau casinos were shuttered for two weeks in February to halt the spread of the novel coronavirus. Since reopening they have stayed in continuous operation, but with few customers, coinciding with restrictions on cross-border movement including in and out of mainland China, a key market for drawing customers to Macau casinos.
The parent said in its Thursday announcement that as of March 31, MGM China’s cash and cash equivalents amounted to US$381 million. The unit’s principal debt outstanding was US$2.3 billion. As of the same date, US$826 million had been drawn on MGM China’s US$1.25-billion revolving credit facility.
MGM Resorts said that due to the “continued impact” of Covid-19, MGM China entered into a further amendment to its credit agreement, effective April 9, that provided for a waiver of its maximum leverage ratio extending through the second quarter of 2021, and a waiver of its minimum interest coverage ratio beginning in the second quarter of 2020 through the second quarter of 2021.
In its Thursday statement, MGM Resorts said that the group’s Macau properties were incurring cash operating expenses – exclusive of rent, interest, variable gaming taxes, corporate expense and expected capital expenditures – of approximately US$1.5 million per day. The group said that was “significantly in excess of amounts being earned at those properties”.
It added: “While the properties have re-opened, several travel and entry restrictions in Macau, Hong Kong and certain cities and regions in mainland China remain in place … significantly impacting visitation to our Macau properties, which continue to have a material impact on MGM China’s results of operations.”
In an April 16 report, brokerage Sanford C. Bernstein Ltd said that as of that date, MGM China had enough cash and credit available to last for up to 15 months of effective “shutdown” of the local gaming market amid the Covid-19 pandemic.
JP Morgan Securities (Asia Pacific) Ltd said in a Thursday note that MGM China’s daily operating expense run-rate of US$1.5 million per day suggested the MGM China unit had “liquidity to survive 12 months of a no-revenue environment”.
The MGM Resorts parent said on Thursday that it had agreed with lenders to undergo a monthly “liquidity test” requiring it to maintain “not less than US$600 million” including in unrestricted cash, cash equivalents and money available under a revolving credit facility.
MGM Resorts said that – as of March 31 – it had cash and cash equivalents of US$6 billion, which included US$1.8 billion at the operating partnership and US$381 million at MGM China. As of the same date, the parent had principal debt outstanding of US$11.8 billion, including US$4 billion at the operating partnership and US$2.3 billion outstanding at MGM China.
The parent recorded consolidated net revenue of US$2.3 billion, a 29 percent decrease from the prior-year quarter. Consolidated adjusted EBITDAR decreased 61 percent year-on-year, to US$295 million in the first quarter 2020.
Net income attributable to MGM Resorts has reached US$807 million in the first three months this year, compared with US$31 million in the prior-year quarter. Such increase was primarily driven by a US$1.5 billion net gain related to the MGM Grand Las Vegas/Mandalay Bay real estate transaction, said the firm.
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"The travel impediments [in mainland China] will lead to reduced visitation into Macau for the next few weeks at least, with Chinese New Year visitation being impacted"
Vitaly Umansky, Tianjiao Yu and Kelsey Zhu
Analysts at Sanford C. Bernstein Ltd