MGM Has Capital to Execute Big Projects, Analysts Say
MGM Resorts International (NYSE: MGM) has the financial resources and access to capital needed to execute multiple new casino hotel projects over the medium term.
That’s the take of CBRE Credit Research Colin Mansfield and Connor Parks who in a new note to clients said the gaming company bolstered its financial flexibility with the recent sale of $850 million of corporate debt. Some proceeds from that transaction will go toward eliminating the operator’s 2025 maturities, meaning it now has no debt coming due before 2026.
The issuance clears out the 2025 maturities at MGM’s domestic box, with the next maturity being the $400 million due in late-2026,” according to the analysts. “Lease-adjusted consolidated leverage at MGM remains low at 4.3 times pro-forma for the issuance.”
The CBRE duo noted that MGM has the resources to work on multiple large-scale projects, including MGM Osaka in Japan, and potentially, converting Empire City Casino in Yonkers, NY to a traditional casino while also possibly pursuing gaming licenses in Thailand and the United Arab Emirates (UAE).
MGM Has Big Ambitions
Each of the projects mentioned above would likely be a multibillion-dollar venture. MGM has a 42.5% stake in the Osaka integrated resort scheme, which carries a price tag of $8 billion, and it could take several billion more to transition Empire City into a Las Vegas-style gaming venue if the operator wins one of the three downstate casino permits New York regulators could award next year.
Likewise, a Thai license could cost as much as $3 billion, depending upon the location of the venue. MGM previously said its MGM China unit would be the entity to pursue an integrated resort in that country.
“Each development would require multibillion-dollar investments and sizeable equity checks, though MGM can fund these via FCF (free cash flow) depending on their ultimate timing,” observed the CBRE analysts.
The analysts added that MGM “has balance sheet flexibility” should it need to issue more debt to deal with the possibility of overlapping timelines on various projects. The gaming company added $175 million to its already sizable cash-on-hand position via the aforementioned bond sale.
Where Dubai Fits in for MGM
MGM executives have consistently said the company would be interested in bidding for a gaming license in the UAE if that opportunity presents itself. Its MGM-branded hotel in Dubai is currently structured as a nongaming venue, but CEO Bill Hornbuckle told analysts and investors earlier this year that the operator said aside space for a casino, indicating it could quickly pivot if need be.
Not including a casino, MGM and local partner Wasl Asset Management Group expect to spend $2.5 billion or more on a three-hotel plan in Dubai. The hotels are expected to be reflections of the Aria, Bellagio, and MGM Grand on the Las Vegas Strip.
The operator has 150,000 square feet to work with at the Dubai property when it comes to adding a casino, but the company hasn’t commented on the cost of such an addition.
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