Analysts expect MGM China to reduce leverage to pre-Covid-19 levels

Lucror Analytics said MGM China’s performance could help it deleverage to pre-pandemic levels by 2024.

Macau.- Analysts at Lucror Analytics have predicted that MGM China could bring its leverage down to pre-pandemic levels by fiscal year 2024. Analysts said the projection is underpinned by the anticipation of positive earnings before interest, taxation, depreciation and amortisation (EBITDA) and the generation of free cash flow (FCF) in the current fiscal year.

Credit analyst Leonard Law emphasised the “maturity” of the MGM Cotai resort and the company’s strategic shift towards the premium mass market segment, which have contributed to the company’s stability. Analysts also noted the company’s prudent capital expenditure plans and historical trends of lower dividend payouts compared to peers.

As of June 30, MGM China boasts over HK$3.51bn (US$450.0m) in cash and cash equivalents, alongside access to undrawn credit facilities totalling HK$7.32bn and HK$5.88bn respectively. The latter credit lines are associated with unsecured credit facilities and revolving credit, facilitated by its majority owner, MGM Resorts International, based in the United States.

The analysis by Lucror Analytics also noted that MGM China could issue new bonds to repay its 2024 notes. However, analysts pointed out that if the company is unable to issue new bonds, it could draw on the US$750m subordinated revolving loan facility, due November 2024, from MGM Resorts. It said the company could tap into the revolving US$934m credit facility as a contingency plan.

MGM China reported revenue of US$741m for Q2.