Ratings agency Fitch has assigned a first time “BB-” Long-Term Issuer Default Rating (IDR) to both MGM Resorts International and its Macau subsidiary MGM China Holdings Limited, citing the company’s scale, robust liquidity position and global diversification as key assets.
It also pointed to the continued rebound in Macau for both of MGM’s properties – MGM Cotai and MGM Macau – as supportive of further near-term growth but warned the company’s active development plans in Japan, Dubai and potentially New York and related cost pressures could affect financial flexibility during weaker economic conditions.
In a separate note, CBRE Credit Research analyst Colin Mansfield observed that the Fitch rating of MGM Resorts and MGM China is one notch higher than that of S&P and Moody’s and a “welcomed view” on MGM given rating agencies’ varying treatments of lease-equivalent debt – an issue linked to MGM’s recent moves to sell off its wholly-owned assets in Las Vegas.
“We’ve long held that MGM is a ‘BB’ category credit and its debt trades as such,” Mansfield wrote.
In issuing its first-time ratings, Fitch also provided for a Stable Outlook which it said, “reflects the company’s expectation that MGM’s leverage will remain stable and that liquidity is sufficient to fund future growth opportunities.”
The agency is predicting group-wide revenues to grow by around 4% year-on-year in 2024 with flat growth in Las Vegas and a low single-digit decline in the regional markets to be more than offset by high-teen growth in Macau.
“The recovery in Macau has been strong following the removal of strict coronavirus policies in late 2022,” Fitch said. “Mass market baccarat was 109% of 2019 levels in 4Q23, while the overall market was at 75%. The lower overall percentage is due to changes in VIP regulations that have caused a material, and potentially permanent, change in the level of gaming revenues from that customer segment.
“However, MGM focuses primarily on mass market as opposed to VIP, and its market share has grown to over 15% in 2023 from 9%, as it benefits from receiving approximately 200 new tables under the concession and the continued ramp up of MGM Cotai.
“Customer reinvestment rates increased in 2023 as more operators focused on the mass market given the decline in the VIP market, but MGM China’s EBITDAR margins have not seen a material impact.”
It added that MGM’s two properties in Macau provide “global diversification benefits” and exposure to a market with favorable long-term growth trends, while future global diversification will come from the company’s Osaka resort project in Japan, its Dubai Porto Island development and a potential license in the New York City market.
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