Moody’s Investors Service Inc says MGM Resorts International’s purchase of the remaining 50 percent of CityCenter (pictured) in Las Vegas, Nevada in the United States, will “raise leverage,” and be a “credit negative” for the casino group.
MGM Resorts is the parent of Macau casino operator MGM China Holdings Inc.
On July 1, MGM Resorts said it had a definitive agreement to purchase Infinity World Development Corp’s 50 percent interest in CityCenter Holdings LLC for US$2.125 billion.
Moody’s noted that under the terms of the agreement, funds managed by the Blackstone Group will acquire the Aria Resort and Casino and Vdara Hotel and Spa real estate at CityCenter, for US$3.89 billion in cash, and MGM Resorts would then lease back the premises.
Moody’s stated: “The transaction is credit negative given the expectation for a considerable amount of lease obligations related to the transaction to come on the balance sheet (potentially higher than MGM’s consolidated 2020 rent multiple equivalent of around 11 times), increasing leverage and financial risk.”
The institution said the deal had “no immediate impact” on the ratings of MGM Resorts. But it added that the casino operator’s negative outlook reflected that debt-to-earnings before interest, taxation, depreciation, and amortisation (EBITDA) leverage, “projected to be in a seven times range in 2022, is elevated while the company continues to recover from shutdowns and reduced visitation at the U.S. and … properties [in Macau] caused by the pandemic.”
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