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Fitch Ratings declares stable outlook for MGM on improved portfolio, MGM Cotai ramp

Monday, 04 June 2018 05:44
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Ratings agency Fitch has declared a “Stable” outlook for MGM Resorts and its subsidiary MGM China – pointing to improved geographic diversification including benefits to be gained from the opening of MGM Cotai as positives for the company.

Fitch Ratings revealed MGM’s updated long-term Issuer Default Ratings (IDRs) on Friday Macau-time, affirming MGM’s senior secured credit facility's rating at BBB-/RR1, MGM’s senior unsecured notes rating at BB/RR3 and MGM China’s senior secured credit facility’s rating at BBB-/RR1.

In particular, Fitch pointed to strong conditions in Macau, where the launch of MGM Cotai in February promises greater market share. The agency adds that it expects the upcoming concession renewals to be “a pragmatic process as the government values stability in the marketplace.”

“Fitch forecasts 14% growth in Macau gross gaming revenues for 2018, which reflects the continued health of VIP and premium mass segments, albeit with some deceleration from 2017,” it said.

“MGM will gain market share following the opening of its first Cotai property, which Fitch forecasts will generate nearly US$350 million in incremental EBITDA. Fitch’s positive view on Macau is supported by an expanding middle class in China and infrastructure development in and around Macau.”

Fitch also highlighted MGM’s favorable asset mix, stating, “Since 2016, MGM has improved its overall geographic diversification and expanded its ‘M Life Rewards’ program. This has been achieved through acquisitions, like Atlantic City’s Borgata (2016) and New York’s Empire City Casino (est. 2019 closing), and new developments.

“Fitch has a positive view on MGM’s developments, which include MGM National Harbor (opened December 2016), MGM Cotai (opened February 2018) and MGM Springfield (est. September 2018). Fitch generally expects good return on investment for these developments.”

The ratings agency said it had not factored any new developments into its assessment, including the company’s pursuit of a Japan IR license.

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