Fitch affirms MGM Resorts rating on account of ‘strong liquidity’

Fitch Ratings has affirmed the ‘BB-’ Long-
Term Issuer Default Ratings (IDRs) of MGM Resorts International and MGM China Holdings, on the basis of the companies’ “strong liquidity position to weather the challenging operating environment.”
Recently, Fitch revised downward its assumptions for major gaming jurisdictions, particularly for the Las Vegas Strip and Macau, to reflect a more challenging recovery trajectory as the coronavirus pandemic continues to hinder international and domestic tourism.
However, according to a report released yesterday by the ratings agency, the U.S.-based casino company and its local subsidiary are in a relatively favorable position partly because of an earlier decision to sell some Las Vegas properties and lease them from the new owners.
“The company was in a favorable liquidity position heading into the pandemic, having recently monetized Bellagio and MGM Grand vis-à-vis sale leaseback transactions,” noted Fitch in the report, “but it also took proactive steps to increase cash as operations halted.”
These included raising unsecured debt “to repay precautionary revolver draws,” as well as terminating a $1.25 billion stock tender offer.
Additionally, Fitch has affirmed MGM Resorts’ and MGM China’s unsecured debt at ‘BB-/RR4’.
The Rating Outlook is Negative, which reflects the risk uncertainty the global gaming industry is facing from the pandemic. Fitch said it could revise the Rating Outlook to Stable when there is a greater degree of confidence in the gaming industry’s recovery trajectory. DB