US tribal casino operator Mohegan Gaming says it may need to seek additional liquidity after confirming an event of default under the terms of a US$275 million “Korea Term Loan” for its US$1.6 billion Korean integrated resort, Mohegan INSPIRE.
The company will also look to refinance a separate KRW1.04 trillion (US$704 million) Korea Credit Facility set to mature in November 2025, warning that without such refinancing it will likely not have sufficient liquidity to meet its debt obligations when they fall due and therefore casting some doubt over the company’s ability to continue as a going concern.
The updates formed part of Mohegan’s 2024 Annual Report, released on New Year’s Eve, which accompanied its financial results for the September 2024 quarter and for the financial year ending 30 September 2024. Those results show that while Mohegan INSPIRE continues to ramp, it has yet to achieve profitability in the nine months since its December 2023 launch.
According to the Annual Report, Mohegan’s wholly-owned subsidiary MGE Korea Limited – the operating entity of Mohegan INSPIRE – will not meet certain financial covenant tests for the period ended 30 September 2024 and as required under the Korea Term Loan it signed in November 2021, representing an event of default under the terms of the agreement. It also confirmed that it had not, as of now, obtained any waiver in relation to those financial covenant tests.
While the company states that it will seek additional sources of liquidity should the lenders exercise their rights and remedies under the Korea Term Loan, including their right to accelerate the repayment of outstanding indebtedness, it warns that the lenders’ rights could include taking possession of pledged collateral – including MGE Korea Limited’s share capital in Mohegan INSPIRE.
The Annual Report also highlights the looming November 2025 maturity of the Korea Credit Facility, the company’s lack of sufficient liquidity to meet its obligations without refinancing, and an associated “credit enhancement support agreement” that could see Mohegan required to repay an additional US$100 million of principal, interest and other sums due should it default.
Such default could result in cross-defaults under its 2022 13.25% Senior Unsecured Notes, its 2021 8% Senior Secured Notes, and/or its 12 Korea Convertible Bonds, Mohegan explained.
“Management plans to refinance the Senior Secured Credit Facility, refinance the Korea Credit Facility, and seek additional sources of liquidity to repay and/or obtain waivers or amendments under the Korea Term Loan,” the company said.
“These plans have not been finalized, are subject to market conditions, and are not within the Company’s control, and therefore, cannot be deemed probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.”
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