Fitch: MGM rating outlook remains Negative

Fitch Ratings has confirmed that the Issuer Default Ratings (IDRs) for MGM Resorts International and MGM China Holdings are at ‘BB-’.
The agency said that the Rating Outlook remains Negative.
“The affirmation reflects Fitch’s expectation that the gross consolidated leverage will decline to 6.0x (the negative rating sensitivity) by 2023 (i.e. within the rating horizon) pro forma for the announced transactions as well as Fitch’s more positive view on Las Vegas’ recovery to pre-pandemic levels,” said the group in a statement.
The Negative Rating Outlook, according to Fitch, reflects the risks and uncertainty the global gaming industry is facing due to the Covid-19 pandemic, particularly jurisdictions that rely on international visitation.
The ratings agency said that it could revise the Rating Outlook to Stable when the trajectory of the gaming industry’s recovery has a greater degree of confidence and MGM has the ability and willingness to de-lever back to 6.0x adjusted gross leverage (on a consolidated basis).
“MGM’s ‘BB-’ IDR reflects the issuer’s strong liquidity, diversified operating footprint and de-levering path back to moderate consolidated gross-adjusted leverage metrics,” explaining that this is offset by weaker financial flexibility as a result of sale-leaseback transactions over the past few years and higher rent costs.
The IDR takes into consideration MGM’s multiple liquidity sources to withstand the lingering coronavirus disruptions such as travel restrictions, particularly in Macau, and potential de-levering path back to 6.0x consolidated gross-adjusted leverage amid a moderate recovery in global gaming.
Fitch links MGM China’s IDR to MGM Resorts International’s. MGM China is strategically and operationally important to MGM Resorts International, and MGM China does not have material ring-fencing mechanisms in its financing documentation that would limit MGM Resorts International’s access to MGM China’s cash flows, it said. LV

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