MGM China Holdings Limited float attracts caution

Prominent credit ratings agency Fitch Ratings Incorporated has reportedly assigned a pessimistic ‘BB-’ grade to the $750 million senior notes offer recently floated by Asian casino operator MGM China Holdings Limited.

According to a Monday report from Inside Asian Gaming, the move from the New York-headquartered firm was shadowed by a more general ‘BB-’ issuer default rating for both MGM China Holdings Limited and its American parent, MGM Resorts International.

Recent recession:

MGM China Holdings Limited is the firm behind Macau’s MGM Cotai and MGM Macau venues and reportedly launched the notes offer last week in an attempt to repay a portion of debt earlier taken out against its revolving credit facility currently estimated to be pushing around $770 million. The source detailed that the Hong Kong-listed operator also intends to earmark some of these funds for ‘general corporate purposes’ as it struggles to recover from a coronavirus-related slump in business that recently saw it post a fourth-quarter deficit of just over $448 million.

Progressive picture:

Fitch Ratings Incorporated reportedly also stated that the notes offer should be viewed ‘neutrally’ as it will likely ‘not materially affect pro forma leverage’ in providing the MGM China Holdings Limited with additional liquidity despite adding ‘more permanent debt’ to the operator’s ‘capital structure’. However, the agency moreover purportedly declared that this scheme has been launched at a time when the global gaming industry is facing ‘risks and uncertainty’ tied to the ongoing coronavirus pandemic that could be especially cutting for those firms in ‘jurisdictions that rely on international or fly-in visitation’.

Optimistic opportunity:

Despite the unenthusiastic rating, Fitch Ratings Incorporated reportedly furthermore divulged that it may revise its grade for the notes offer from MGM China Holdings Limited, which is to come due in February of 2027 featuring a 4.75% return, up to ‘stable’ once the market improves and if ‘there is a greater degree of confidence in the gaming industry’s recovery trajectory’. As such and the source explained that the operator recently recorded a rise of some 150% quarter-on-quarter in its adjusted earnings before interest, tax, depreciation and amortization for the final three months of 2020 to approximately $47 million.

Partner petition:

MGM Resorts International was earlier this year urged to restructure its 55.95% stake in MGM China Holdings Limited by offloading a portion of this investment to a selection of Chinese investors. Minority backer Snow Lake Capital reportedly claimed that such a move, which was ultimately rebuffed, could help the Las Vegas-based giant to diversify its Macau offering and increase the likelihood of its casino concession for the former Portuguese enclave being extended beyond next year’s cut-off.