MGM Resorts seeks to add to liquidity after several notes sales in Q2

By Devika Patel

Knoxville, Tenn., July 31 – MGM Resorts International plans to keep adding to its liquidity position, even after issuing several tranches of notes last quarter for $2.05 billion.

In May, the company issued $750 million of 6¾% senior notes due 2025; in June, MGM Growth Properties Operating Partnership LP issued $800 million of 4 5/8% senior notes due 2025 and MGM China Holdings Ltd. issued $500 million of 5¼% senior notes due 2025.

“Liquidity is of utmost importance, especially in current times, and we continue to take steps to further bolster our already strong liquidity position,” president and chief executive officer William J. Hornbuckle IV said on the company’s second quarter ended June 30 earnings conference call on Thursday.

“During the second quarter, MGM Resorts, MGM China and MGP collectively raised $2.05 billion in the debt capital markets,” Hornbuckle said.

“During the second quarter, we continued to take proactive steps to further bolster our already strong liquidity position by accessing the debt capital markets [and] amending our credit agreement to preserve access to our revolver,” treasurer and chief financial officer Corey Sanders stated in a press release.

The company reduced 85% of its operating expenses and management believes it can reduce domestic operating and corporate costs by approximately $450 million.

“During closures, we reduced 85% of our operating expenses and, as we reopen, we are managing variable labor to closely match demand,” Hornbuckle said.

“We also identified certain expenses and amenities that we believe we can eliminate as they are not essential and as such, we believe we can reduce our overall domestic operating and corporate costs by approximately $450 million compared with the 2019 levels,” Hornbuckle said.

The company seeks to maximize cash flow during this downturn.

“We are proactively engaged with local governments, regulators and public health experts, acting as an informed and sought-after voice in conversations about public health and safety trends, restrictions and protocols as they continue to change and evolve and we remain focused on ensuring we maintain our strong balance sheet and an operating strategy designed to maximize cash flow despite these very difficult times,” Hornbuckle said.

Cash and cash equivalents were $4,835,505,000 as of June 30, 2020, compared to$ 2,329,604,000 as of Dec. 31, 2019. Total liquidity as of June 30 was $8.1 billion.

Net long-term debt was $11,339,561,000 as of June 30, 2020, compared to $11,168,904,000 as of Dec. 31, 2019.

As of June 30, $550 million was drawn on the company's $1.5 billion revolving facility, $200 million was drawn on the $1.35 billion MGM Growth Properties Operating Partnership revolving credit facility, $484 million was drawn on the $1.25 billion MGM China revolving credit facility and no amounts were drawn on the $400 million MGM China second revolving credit facility.

On April 23, MGM Resorts priced an upsized $750 million issue of 6¾% five-year senior notes (Ba3/BB-) at par.

Initial talk had the deal coming to yield 7% to 7¼%, a bond trader said. The deal was upsized from $500 million.

J.P. Morgan Securities LLC, BofA Securities Inc., Barclays, Citigroup Global Markets Inc., BNP Paribas Securities Corp., Citizens Capital Markets Inc., Fifth Third Securities Inc., Scotia Capital (USA) Inc. and SMBC Nikko Securities America Inc. are the joint bookrunners.

The notes come with two years of call protection.

Proceeds were earmarked for general corporate purposes, including increasing liquidity.

On June 2, MGM Growth Properties Operating Partnership and MGP Finance Co-Issuer, Inc. priced an upsized $800 million issue of five-year senior notes (B1/BB-/BB+) at par to yield 4 5/8% in a drive-by.

Citigroup Global Markets Inc. was the lead bookrunner. Joint bookrunners were BofA Securities Inc., Barclays, BNP Paribas Securities Corp., Citizens Capital Markets Inc., Credit Agricole CIB, Fifth Third Securities Inc., J.P. Morgan Securities LLC, Scotia Capital (USA) Inc. and SMBC Nikko Securities America Inc.

The issue size increased from $500 million.

The yield printed 12.5 basis points through the 4¾% to 5% yield talk. Initial price talk was in the 5¼% area.

MGM Growth Properties, a Las Vegas-based real estate investment trust, earmarked the proceeds to pay down its revolving credit facility.

On June 11, Macao-based MGM China, a casino development and operations company, priced $500 million of five-year senior notes (Ba3/BB-) at par to yield 5¼%.

The yield printed 25 bps below the tight end of guidance in the 5 5/8% area. Initial talk was in the high 5% area.

Upon a change of control of the company and/or a ratings decline, investors may put the notes at 101%.

Investors may put the notes at par upon the occurrence of certain events relating to the termination, rescission, revocation or modification of the company’s gaming license.

Proceeds were earmarked to pay down MGM China’s revolving credit facility and for general corporate purposes.

MGM Resorts is a Las Vegas-based operator of destination resorts.

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