Macau casino operator MGM China Holdings Ltd has entered into a third supplemental agreement with banks to amend the terms on its HKD23.4-billion (US$3-billion) loan, said the parent MGM Resorts International in a filing on Thursday.
The Macau unit received approval from its lenders on February 2 to relax conditions attached to the loan financing. It includes loosening the covenants on MGM China’s leverage ratio, according to the filing.
MGM China in November held a topping off ceremony for its under construction new resort on Cotai. The HKD24-billion MGM Cotai is scheduled for a fourth quarter 2016 opening. Its quoted budget excludes land costs and capitalised interest.
In Thursday’s filing, the parent company said the latest supplement amended the leverage ratio definitions “to include the MGM Cotai earnings before interest, taxation, depreciation, and amortisation (EBITDA) on an annualised basis and increase the permitted maximum leverage ratios”.
MGM China has been authorised to raise the maximum total leverage to six times from the first quarter of 2016 until the second quarter in 2017, according to the documents. A report by Bloomberg News last week said the original agreement had allowed the company to raise the maximum total leverage to four times, and only after the milestone of the first anniversary of the opening of MGM Cotai had been passed.
Fitch Ratings Inc said in a report last week that gaming industry issuers, including MGM Resorts, “have generally good liquidity”, addressing most near-term maturity needs. The ratings agency estimated – as of January 2016 – MGM Resorts’ development capital expenditure commitments through to 2018 at US$3.2 billion.
In November a unit of Melco Crown Entertainment Ltd – another Macau casino operator – received consent from banks to amend the terms on its HKD10.85-billion loan for the Studio City scheme. Studio City started operations in October last year.
The approved covenants for the Melco Crown unit included changing what was termed “the project opening date condition” from 400 to 250 gaming tables, with “consequential adjustments to the financial covenants, and rescheduling the commencement of financial covenant testing”.
The Macau government granted a new-to-market allocation of 250 gaming tables to Studio City – 200 for use from the opening and a further 50 from January. Melco Crown had said prior to Studio City opening it hoped to have 400 tables from launch.
Casino gross gaming revenue (GGR) in Macau fell by 34.3 percent year-on-year in 2015, according to official data. The monthly GGR tally in January declined 21.4 percent from the prior-year period, making it the 20th straight month of decline when judged year-on-year.
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"The [Macau] government has a lead in this subject in regards to what should be done after the [gaming] concessions expire. We will be first listening to what the government will say”
Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings