MGM-CityCenter deal credit negative, according to Moody’s
Moody’s Investors Service Inc says MGM Resorts International’s purchase of the remaining 50% of CityCenter (pictured) in Las Vegas, Nevada in the US, “will increase leverage” and be “negative credit” for the group of casinos.
MGM Resorts is the parent company of Macau casino operator MGM China Holdings Inc.
On July 1, MGM Resorts announced that it had reached a definitive agreement to purchase Infinity World Development Corp’s 50% stake in CityCenter Holdings LLC for $ 2.125 billion.
Moody’s noted that under the deal, funds managed by the Blackstone Group will acquire the Aria Resort and Casino and Vdara Hotel and Spa real estate from CityCenter, for $ 3.89 billion in cash, and MGM Resorts would then lease. the locals, the residents.
Moody’s said: âThe transaction has negative credit given the expectation of a significant amount of lease obligations related to the upcoming transaction on the balance sheet (potentially greater than the multiple equivalent of MGM’s 2020 consolidated rent of about 11 times), increasing leverage and financial risk. “
The institution said the deal had “no immediate impact” on MGM Resorts’ ratings. But he added that the negative outlook for the casino operator reflected that the leverage of the debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) ratio, “expected to be in a seven-fold range in 2022 , is high as the business continues to recover from closures and reduced visits to the US andâ¦ properties [in Macau] caused by the pandemic. “