Fitch rates MGM Resort loan BB

Fitch Ratings said it assigned a BB with a recovery rating of RR1 to MGM Resorts International’s new $4 billion credit facility.

The agency also said it affirmed MGM’s issuer default rating at B, along with all of MGM’s related issuers and transactions.

The ratings affirmed include the company’s senior secured notes due 2013, 2014, 2017 and 2020 at BB with an RR1 recovery rating and prior partially secured senior credit facility at B+ with an RR3 recovery rating, which were subsequently withdrawn. Fitch also affirmed its senior unsecured notes at B with an RR4 recovery rating, convertible senior notes due 2015 at B with an RR4 recovery rating and senior subordinated notes at CCC+ with an RR6 recovery rating.

Also affirmed includes MGM China Holdings, Ltd. and MGM Grand Paradise SA’s issuer default ratings at BB- with an RR2 recovery rating and senior secured credit facility at BB+ with an RR2 recovery rating.

The outlook is positive.

The credit facility is comprised of a $1.2 billion revolver, $1.05 billion term loan A and $1.75 billion term loan B. The revolver and term loan A will mature in December 2017 and pays Libor plus 3%. Term loan B matures in December 2019 and pays Libor (with 1% floor) plus 3.25%. Term loan B was issued with a discount of 99.5%.

The rating on the new credit facility reflects a calculation of 91% or better recovery prospects for the lenders in a default event, Fitch said.

The facility is secured by MGM’s Bellagio, Mirage and MGM Grand, which secure up to $3.35 billion in claims. MGM Grand Detroit is a co-borrower and secures the facility up to $450 million.

The new credit agreement has more lenient covenants than the prior agreements, allowing more flexibility in terms of restricted payments, additional borrowing and investments, Fitch said.

MGM’s main financial covenant of minimum EBITDA was relaxed, the agency added.

The ratings reflect the anticipated interest cost savings resulting from the transactions, which Fitch estimated at about $190 million annually.

The ratings also consider improved pro forma liquidity and slightly reduced gross leverage, the agency said.

The transaction addresses the largest maturities through 2014, with only $1.1 billion remaining through that timeframe, Fitch said.

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