The current credit profile of casino operator Mohegan Tribal Gaming Authority reflects “its very high leverage, significant debt maturities in the next two years, and large annual cash distributions to the Mohegan Tribe of Indians,” said Moody’s Ratings in a review published recently.
Aside from operations in the U.S. and Canada, the company, which trades as Mohegan Gaming & Entertainment, also runs the Mohegan Inspire Entertainment Resort (pictured) – with a foreigner-only casino – at Incheon, South Korea.
The Mohegan group’s ratio of debt to earnings before interest, taxation, depreciation, and amortisation (EBITDA) “increased to 10.7 times for the last 12 months ending June 30, 2014, from under 7.0 times historically,” observed the ratings agency.
“The company raised debt to fund a growing pool of unrestricted properties, including the development of Mohegan Inspire in Incheon, South Korea, with the objective of expanding and diversifying its footprint,” said Moody’s.
It added: “Mohegan’s large and well-established casinos in proximity to major population centres and its earnings diversification from a growing pool of properties mitigate the credit risk from the high debt burden.”
According to Moody’s, both Mohegan Inspire and Niagara Resorts, the latter a business in Canada, “are in unrestricted subsidiaries, which do not guarantee the restricted subsidiaries’ debt but Mohegan benefits from earnings diversification and expanded size and scale”.
In August, Mohegan Gaming reported net revenues of nearly US$504.2 million in the three months to June 30, the third quarter of the group’s financial year. The result was up 9.2 percent quarter-on-quarter, and represented a 21.4-percent increase from a year earlier.
The casino firm said at the time that the gain in the fiscal third quarter was “primarily due to continued growth in Mohegan Digital and revenue from Mohegan Inspire”.
In a recent investor day presentation, Mohegan Gaming’s management said mass-market and premium-mass gaming table drop at the South Korean complex has nearly tripled since the casino at the complex opened in February.
