GGRAsia – MGM drops share buyback plan amid slower business

MGM drops share buyback plan amid slower business

Mar 13, 2020 Newsdesk Latest News, Top of the deck, World

U.S.-based casino operator MGM Resorts International says it has terminated its US$1.25-billion share buyback plan, which was due to expire on Thursday. The company said in a Thursday release that the termination was a result of the share price and market index conditions to the tender offer “not having been satisfied,” indicating also a slowdown in business, including in Macau.

The company said no shares would be purchased related with the tender offer and all shares previously tendered and not withdrawn would be “promptly returned to tendering holders”. MGM Resorts is the parent of Macau-based MGM China Holdings Ltd.

The MGM Resorts statement quoted the group’s chairman and chief executive, Jim Murren, as saying: “As a result of the unforeseen and unprecedented volatility in the financial markets due to coronavirus, and the resulting impact on our ability to determine and maintain an offering price range, we have decided to terminate the tender offer.”

He added: “The health and safety of our guests and employees is our highest priority, and we continue to take all steps necessary to combat the impact of the coronavirus.”

A number of casino-operator stocks has seen prices hammered this week amid general concern among investors regarding the potential risk to travel and tourism posed by the new coronavirus. The Covid-19 virus outbreak – recorded first in mainland China – has now been declared a pandemic by the World Health Organization, with infections across the Asia-Pacific region and the globe.

Shares of MGM Resorts plunged 15.6 percent on Thursday, a day after the company confirmed that a guest at one of its Las Vegas properties had tested positive for Covid-19.

Shares in market rivals Las Vegas Sands Corp and Wynn Resorts Ltd – two companies also with a presence in the Macau market – continued their slide. Wynn Resorts’ share price fell nearly 15.9 percent, while Las Vegas Sands dropped 9.2 percent. A guest at Encore Boston Harbor, the newest property from Wynn Resorts, tested positive for Covid-19, said on Thursday the Massachusetts Gaming Commission.

Near-term impact

In Thursday’s release, MGM Resorts confirmed it expected a slow business environment in the near term.

The group’s CEO said that to date, efforts to contain the virus had “resulted in cancellations or postponements of major conferences, festivals, and sporting events as well as a reduction in broader travel demand in Las Vegas and across the globe”.

Mr Murren said that MGM Resorts properties in the U.S. “have been impacted in the near term” primarily driven by increased cancellations in hotel and convention bookings in Las Vegas, “particularly during the months of March and April”.

The executive said additionally that MGM China “continue to be impacted by low visitation” following the 15-day shutdown of all casinos in Macau in February. Macau casino gross gaming revenue declined by 87.8 percent in February in year-on-year terms, according to official data.

“In light of these trends, we are actively managing our costs to help protect our margins,” stated Mr Murren. “At this time, we believe the company has ample liquidity to weather the current uncertainties in the marketplace. More importantly, we do not expect the coronavirus to have a material impact on our business long term,” he added.

As of March 11, MGM Resorts had cash investments of approximately US$2.4 billion, excluding MGM China and MGM Growth Properties LLC. In addition, the company said it had a US$1.5 billion undrawn revolving credit facility, providing approximately US$3.9 billion of liquidity.

Bloomberg News reported on Thursday that Wynn Resorts was planning to draw down a portion of a US$850 million revolving credit line, amid concerns related with the new coronavirus.

Citing unidentified people with knowledge of the matter, the media outlet said Wynn Resorts was seeking to shore up its balance sheet as broader market uncertainty grows. GGRAsia approached Wynn Resorts on the matter, but a company spokesperson declined to comment

On Thursday, Wynn Resorts chief executive Matt Maddox said the company would be taking additional steps as part of its efforts to contain the spread of the pandemic.

Beginning this weekend, Wynn Resorts will ensure “appropriate distancing” between guests at gaming devices and dining tables, and will cancel for the time being all large entertainment gatherings, said Mr Maddox. This included buffet meals, nightclub events and theatre performances at its Las Vegas and Boston properties.