MGM Resorts pricing $1 billion in new debt

For the second time this year, MGM Resorts International priced $1 billion in new unsecured debt, saying Friday the 6.75 percent notes will come due in 2020.

Earlier, the casino operator announced the pursuit of
$700 million in new debt but kicked up the figure by
$300 million later in the day. The transaction is expected to close Wednesday.

In March, MGM Resorts raised $1 billion in unsecured 10-year bonds at 7.75 percent, which at the time was the lowest interest rate the company had seen since 2007.

The net proceeds will repay a portion of indebtedness that may include indebtedness under its senior credit agreement or outstanding debt securities, MGM Resorts said in a statement.

The company carries
$13.4 billion in long-term debt, the second-largest figure in the casino industry.

Moody’s Investors Service took a positive view toward the MGM Resorts announcement, saying the net proceeds would strengthen the balance sheet.

The casino operator owns 10 Strip resorts including Bellagio, MGM Grand, The Mirage, and has a 50 percent ownership stake in CityCenter.

“MGM’s proposed note offering is another positive step towards refinancing its considerable debt maturities in the next two years,” Moody’s analyst Peggy Holloway said in a statement.

The company has roughly $1.3 billion in long term debt that expires next year.

“Assuming the proposed transaction occurs, Moody’s estimates MGM will have adequate liquidity to support operations and all 2013 debt maturities,” Holloway said.

Fitch Ratings Service thought the transaction would also allow MGM Resorts to address maturities in 2014.

“Fitch views these transactions plus MGM’s improving free cash flow prospects favorably, which may lead to positive rating action within the near term,” Fitch gaming analyst Brian Bertsch said in a statement.

Union Gaming Group managing director Bill Lerner said he suspected the notes could be priced below March’s 7.75 percent rate, given improved credit market conditions and the shorter maturity.

“We view today’s news as a positive given the company continues to shore up the balance sheet with long-dated notes and is able to opportunistically access the capital markets in favorable fashion while increasing liquidity,” Lerner said in a note to investors.

MGM Resorts is seeking expansion opportunities in both American and foreign gaming markets. The company is financially backing a ballot initiative in Maryland, which could allow the casino operator to build a $700 million gaming complex 10 miles from Washington D.C.

MGM Resorts also seeks a single gaming license in Western Massachusetts that would let the company construct a casino in Springfield. MGM Resorts has also been linked to recent casino expansion talk in Toronto and New York City.

Shares of MGM Resorts closed at $11.40 Friday on the New York Stock Exchange, up 12 cents or 1.06 percent.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.