Macau concessionaire MGM China Holdings is expected to continue recent deleveraging momentum in the months ahead, with leverage to decline to 2.7x by year-s end, improved from 3.4x in 1Q24 and 4.1x at end-2023.
According to CBRE Credit Research analysts Colin Mansfield and Connor Parks, the improved leverage ratio is supported by strong Macau earnings momentum which has allowed MGM China to adopt a “refinancing strategy”.
In an overnight note following the recent issuance by MGM China of US$500 million in 7.125% unsecured notes due 2031 – the proceeds were used to pay down amounts outstanding under a revolver – the analysts said they anticipate the company to continue modest deleveraging amid solid EBITDA in Macau, and to continue with the recent resumption of dividend payments, supported by healthy free cash flow generation.
“Credit improvements throughout the MGM complex have coincided with the company being a repeat issuer in the credit markets this year, with US$1.25 billion raised across MGM and MGM China year-to-date,” they wrote.
“The company’s robust liquidity positions them well to comfortably address near-term maturities should they desire, but their low leverage and current spreads support a refinancing strategy.
“MGM and MGM China have US$675 million and US$500 million of unsecured notes, respectively, coming due in June 2025, which we anticipate to be addressed in similar fashion to balance sheet moves completed in 2024.”
MGM China reported all-time record EBITDA of US$301 million in the January 2024 quarter.
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