{"id":131195,"date":"2020-03-26T09:33:31","date_gmt":"2020-03-26T16:33:31","guid":{"rendered":"https:\/\/www.casino.org\/news\/?p=131195"},"modified":"2020-03-26T10:51:29","modified_gmt":"2020-03-26T17:51:29","slug":"mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade","status":"publish","type":"post","link":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/","title":{"rendered":"MGM Resorts Joins Parade of Gaming Credit Downgrades as Fitch Lowers to BB-"},"content":{"rendered":"

MGM Resorts International (NYSE:MGM) is joining a growing list of gaming companies seeing their credit grades lowered amid the coronavirus pandemic, with Fitch Ratings trimming the Bellagio operator to \u201cBB-\u201d from \u201cBB.\u201d<\/p>\n

\"\"
MGM joins a cadre of gaming companies seeing credit ratings lowered. (Image: CNBC)<\/figcaption><\/figure>\n

In downgrading MGM’s outlook to \u201cnegative\u201d from \u201cstable\u201d \u2013 something else that’s becoming increasingly common in the casino business<\/a> \u2013 Fitch questioned the wisdom of the operator’s recent Las Vegas Strip asset sales and plans to decrease its stake in MGM Growth Properties (NYSE:MGP).<\/p>\n

The downgrade primarily reflects MGM’s decreased financial flexibility following the recent sale-leaseback transactions, as well as the severe disruption to global gaming caused by the coronavirus outbreak,\u201d said the research firm. \u201cThe sale and leaseback of Bellagio and MGM Grand, the company’s last two flagship Las Vegas Strip assets, reduce MGM’s liquidity levers vis-\u00e0-vis ability to monetize assets and increase MGM’s rent obligations to unaffiliated parties, most notably Blackstone Real Estate Income Trust, Inc. (BREIT).\u201d<\/p><\/blockquote>\n

Citing MGM’s plan to reduce its position in MGP, Fitch noted that if the operator’s debt\/earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR)<\/span> ratio exceeds 5.5x, it could be vulnerable to another downgrade. The previous estimate was 6x.<\/p>\n

Cash Concerns<\/h2>\n

Analysts are growing concerned about the cash burn rates<\/a> operators are incurring while casinos across the US are temporarily closed because of the COVID-19 pandemic.<\/p>\n

\n

For MGM, that sum is estimated to be $14.4 million per day. But the company generated $8.2 billion in proceeds from Strip real estate sales, and recently fully drew on a $1.5 billion on a bank credit line to move additional cash onto its balance sheet.<\/p>\n<\/div>\n

Still, Fitch believes the Mirage operator is going to burn more cash than expected this year due to the zero-revenue scenario now facing the gaming industry.<\/strong><\/p>\n

\u201cDue to the operating disruption caused by coronavirus, Fitch expects MGM’s 2020 consolidated lease adjusted gross leverage to be well above 5.5x, and the company’s cash burn to be $1.4 billion, compared to $1.1 billion in positive Fitch-defined free cash flow (FCG) in Fitch prior forecast for 2020,\u201d said the ratings agency.<\/p>\n

Adding Fixed Costs<\/h2>\n

Sale-leaseback deals are growing in popularity in the gaming industry because they allow operators to monetize an asset while still maintaining exposure to a property’s upside potential. The downside is the deals create new fixed costs for the seller-turned-lessor.<\/p>\n

For example, in the sale of MGM Grand and Mandalay Bay to BREIT and MGP, the operator agreed to an initial rent term of $292 million per year. In the sale-leaseback of Bellagio to BREIT announced last October, MGM agreed to an initial annual rent of $245 million<\/a>.<\/p>\n

\u201cThe new fixed costs created by the Bellagio and MGM Grand transactions have weakened MGM’s domestic FCF generation, inclusive of distributions from its subsidiaries,\u201d said Fitch. \u201cFitch estimates domestic FCF margin will be in the low-to-mid single digits after 2020, versus closer to 10% in Fitch’s prior forecast before the sale-leasebacks.\u201d<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

MGM Resorts International (NYSE:MGM) is joining a growing list of gaming companies seeing their credit grades lowered amid the coronavirus pandemic, with Fitch Ratings trimming the Bellagio operator to \u201cBB-\u201d from \u201cBB.\u201d In downgrading MGM’s outlook to \u201cnegative\u201d from \u201cstable\u201d \u2013 something else that’s becoming increasingly common in the casino business \u2013 Fitch questioned the […]<\/p>\n","protected":false},"author":46,"featured_media":131197,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[62,10],"tags":[],"acf":[],"yoast_head":"\nMGM Resorts Becomes Latest Operator Hit With Credit Downgrade<\/title>\n<meta name=\"description\" content=\"MGM Resorts joins a growing list of casino companies being slapped with lower credit grades as the coronavirus weighs on the industry.\" \/>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"MGM Resorts Becomes Latest Operator Hit With Credit Downgrade\" \/>\n<meta property=\"og:description\" content=\"MGM Resorts joins a growing list of casino companies being slapped with lower credit grades as the coronavirus weighs on the industry.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/\" \/>\n<meta property=\"og:site_name\" content=\"Casino.org\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Casino.OrgNews\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-26T16:33:31+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-03-26T17:51:29+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"4253\" \/>\n\t<meta property=\"og:image:height\" content=\"2236\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Todd Shriber\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@etfgodfather\" \/>\n<meta name=\"twitter:site\" content=\"@Casino_Org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Todd Shriber\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/\",\"url\":\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/\",\"name\":\"MGM Resorts Becomes Latest Operator Hit With Credit Downgrade\",\"isPartOf\":{\"@id\":\"https:\/\/www.casino.org\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg\",\"datePublished\":\"2020-03-26T16:33:31+00:00\",\"dateModified\":\"2020-03-26T17:51:29+00:00\",\"author\":{\"@id\":\"https:\/\/www.casino.org\/news\/#\/schema\/person\/f4cecf70a5032bc4e60eb73fc86d4a85\"},\"description\":\"MGM Resorts joins a growing list of casino companies being slapped with lower credit grades as the coronavirus weighs on the industry.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#primaryimage\",\"url\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg\",\"contentUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg\",\"width\":4253,\"height\":2236,\"caption\":\"MGM joins a cadre of gaming companies seeing credit ratings lowered. (Image: CNBC)\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"News\",\"item\":\"https:\/\/www.casino.org\/news\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Financial\",\"item\":\"https:\/\/www.casino.org\/news\/financial\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"MGM Resorts Joins Parade of Gaming Credit Downgrades as Fitch Lowers to BB-\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.casino.org\/news\/#website\",\"url\":\"https:\/\/www.casino.org\/news\/\",\"name\":\"Casino.org\",\"description\":\"Latest Casino and Gaming News\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.casino.org\/news\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.casino.org\/news\/#\/schema\/person\/f4cecf70a5032bc4e60eb73fc86d4a85\",\"name\":\"Todd Shriber\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.casino.org\/news\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2023\/03\/cropped-11-96x96.png\",\"contentUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2023\/03\/cropped-11-96x96.png\",\"caption\":\"Todd Shriber\"},\"description\":\"Todd Shriber is a senior news reporter covering gaming financials, casino business, stocks, and mergers and acquisitions for Casino.org. Todd got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long\/short hedge fund, where he specialized in the trading sector and international ETFs leading up to and during the financial crisis. He joined Casino.org in 2019. Currently, Todd analyzes, researches, and writes on ETFs for various web-based publications and financial services firms. Shriber has been featured and quoted in Barron's, CNBC.com, and The Wall Street Journal. His work can also be found on Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business, and Nasdaq.com. He currently resides in Las Vegas, where he enjoys golf and taking his black lab to the dog park. He's also an avid sports fan and likes to wager on college football and the NBA. You can also find him at the three-card poker and roulette table, even though he knows better. Contact Todd at todd.shriber@casino.org.\",\"sameAs\":[\"https:\/\/muckrack.com\/todd-shriber\",\"https:\/\/www.linkedin.com\/in\/toddshriber\/\",\"https:\/\/x.com\/etfgodfather\"],\"url\":\"https:\/\/www.casino.org\/news\/author\/todd-shriber\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"MGM Resorts Becomes Latest Operator Hit With Credit Downgrade","description":"MGM Resorts joins a growing list of casino companies being slapped with lower credit grades as the coronavirus weighs on the industry.","robots":{"index":"noindex","follow":"follow"},"og_locale":"en_US","og_type":"article","og_title":"MGM Resorts Becomes Latest Operator Hit With Credit Downgrade","og_description":"MGM Resorts joins a growing list of casino companies being slapped with lower credit grades as the coronavirus weighs on the industry.","og_url":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/","og_site_name":"Casino.org","article_publisher":"https:\/\/www.facebook.com\/Casino.OrgNews","article_published_time":"2020-03-26T16:33:31+00:00","article_modified_time":"2020-03-26T17:51:29+00:00","og_image":[{"width":4253,"height":2236,"url":"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg","type":"image\/jpeg"}],"author":"Todd Shriber","twitter_card":"summary_large_image","twitter_creator":"@etfgodfather","twitter_site":"@Casino_Org","twitter_misc":{"Written by":"Todd Shriber","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/","url":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/","name":"MGM Resorts Becomes Latest Operator Hit With Credit Downgrade","isPartOf":{"@id":"https:\/\/www.casino.org\/news\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#primaryimage"},"image":{"@id":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#primaryimage"},"thumbnailUrl":"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg","datePublished":"2020-03-26T16:33:31+00:00","dateModified":"2020-03-26T17:51:29+00:00","author":{"@id":"https:\/\/www.casino.org\/news\/#\/schema\/person\/f4cecf70a5032bc4e60eb73fc86d4a85"},"description":"MGM Resorts joins a growing list of casino companies being slapped with lower credit grades as the coronavirus weighs on the industry.","breadcrumb":{"@id":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#primaryimage","url":"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg","contentUrl":"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/03\/mgm.jpeg","width":4253,"height":2236,"caption":"MGM joins a cadre of gaming companies seeing credit ratings lowered. (Image: CNBC)"},{"@type":"BreadcrumbList","@id":"https:\/\/www.casino.org\/news\/mgm-resorts-becomes-latest-operator-hit-with-credit-downgrade\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"News","item":"https:\/\/www.casino.org\/news\/"},{"@type":"ListItem","position":2,"name":"Financial","item":"https:\/\/www.casino.org\/news\/financial\/"},{"@type":"ListItem","position":3,"name":"MGM Resorts Joins Parade of Gaming Credit Downgrades as Fitch Lowers to BB-"}]},{"@type":"WebSite","@id":"https:\/\/www.casino.org\/news\/#website","url":"https:\/\/www.casino.org\/news\/","name":"Casino.org","description":"Latest Casino and Gaming News","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.casino.org\/news\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.casino.org\/news\/#\/schema\/person\/f4cecf70a5032bc4e60eb73fc86d4a85","name":"Todd Shriber","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.casino.org\/news\/#\/schema\/person\/image\/","url":"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2023\/03\/cropped-11-96x96.png","contentUrl":"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2023\/03\/cropped-11-96x96.png","caption":"Todd Shriber"},"description":"Todd Shriber is a senior news reporter covering gaming financials, casino business, stocks, and mergers and acquisitions for Casino.org. Todd got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long\/short hedge fund, where he specialized in the trading sector and international ETFs leading up to and during the financial crisis. He joined Casino.org in 2019. Currently, Todd analyzes, researches, and writes on ETFs for various web-based publications and financial services firms. Shriber has been featured and quoted in Barron's, CNBC.com, and The Wall Street Journal. His work can also be found on Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business, and Nasdaq.com. He currently resides in Las Vegas, where he enjoys golf and taking his black lab to the dog park. He's also an avid sports fan and likes to wager on college football and the NBA. You can also find him at the three-card poker and roulette table, even though he knows better. Contact Todd at todd.shriber@casino.org.","sameAs":["https:\/\/muckrack.com\/todd-shriber","https:\/\/www.linkedin.com\/in\/toddshriber\/","https:\/\/x.com\/etfgodfather"],"url":"https:\/\/www.casino.org\/news\/author\/todd-shriber\/"}]}},"_links":{"self":[{"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/posts\/131195"}],"collection":[{"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/users\/46"}],"replies":[{"embeddable":true,"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/comments?post=131195"}],"version-history":[{"count":0,"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/posts\/131195\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/media\/131197"}],"wp:attachment":[{"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/media?parent=131195"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/categories?post=131195"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.casino.org\/news\/wp-json\/wp\/v2\/tags?post=131195"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}