Macau Gets a Huge Vote of Confidence as MGM Reinvests
Published June 14, 2020 by Lee R
A sign of relief in Macau comes on the heels of MGM's new billion dollar credit fund.
Despite all appearances, Macau is alive—thanks in no small part to it a local whale restructuring financial support on the island gaming hotspot.
MGM China Holds
One new retrenching involves Macau casino operator MGM China Holdings Limited, which has announced the establishment of a new $1.25 billion revolving credit facility to carry its business through the recent slowdowns of the ongoing coronavirus pandemic.
Half a Billion Provision
Both Inside Asian Gaming and GGRAsia reported an official filing on the part of the Hong Kong-listed firm valuing a provisional agreement with lenders worth at anywhere from approximately $301.85 million to slightly over $503 million.
Recovery
The move comes on the spurs of a need for MGM China Holdings Limited to recover from aggregated first-quarter net revenues for its prominent MGM Macau and MGM Cotai holdings falling 63% year-on-year to $270.91 million while their associated earnings before interest, tax, depreciation and amortization hit almost $12.91 million.
Rising Costs
Travel restrictions following Macau’s 15-day coronavirus-related casino lockdown in February have lowered combined occupancy rates of these venues to a meager 36% against daily joint operational costs of an estimated $1.5 million per day.
Private Relief
The deal matures May 15th, 2024, but MGM Resorts International-owned MGM China Holdings Limited may summon the provision at any time in the event of exhaustion of resources from its existing $1.25 billion senior unsecured revolving credit facility.
The Deal
The new-found resource will be subjected to a fluctuating annual interest rate fixed to the Hong Kong Interbank Offered Rate (HIBOR), alongside a leverage ratio margin that could peak at 2.75%. Any outstanding debts are secured by the provision of immediate repayment should MGM Resorts International ceases to be the majority owner.
The Purpose
The proceeds will be used “for ongoing working capital needs and the general corporate purposes of the group.”
Outlook
While this is just one organization's agreement, it is important to see that the biggest operator in Macau remaining vested. Similar measures to varying scales need to be taken by all operator stakeholders in the region, with the large-scale restructuring of China Holdings manifesting as an important precedent for renewed commitment of all operators in the battered but still fertile Macau gaming hub.
