MGM’s contribution to Osaka IR could be between US$2bn and US$2.5bn – S&P

MGM Resorts International and ORIX (MGM-Orix) have been selected as Osaka’s IR partner.
MGM Resorts International and ORIX (MGM-Orix) have been selected as Osaka’s IR partner.

S&P Global Ratings Inc. has suggested the casino operator’s equity contribution to a forthcoming integrated resort (IR) in Osaka could be between US$2bn and US$2.5bn.

Japan.- Based on the estimated US$10bn development cost for a casino resort in Osaka, S&P Global Ratings Inc. has recently forecasted MGM Resorts International could contribute between US$2bn and US$2.5bn to the upcoming IR.

MGM Resorts International is part of a consortium with ORIX that was selected as Osaka’s IR partner for its bid to host an IR. MGM-Orix has proposed to invest JPY1.08tn (US$8.38bn). The company expects to open it by the end of 2029.

However, the government has not yet approved Osaka’s IR District Development Plan thus analysts do not expect material spending to begin before late 2023 or 2024.

Osaka submitted its bid last April. In November 2022, Osaka mayor Ichiro Matsui said the prefecture was asked to submit a series of documents detailing how it was going to resolve issues around its bid. 

According to previously announced information, MGM and Orix will each own 40 per cent of the consortium, while local investors will own the remaining 20 per cent. However, if the consortium does not attract more investors, the participation of MGM and Orix will increase to 50 per cent each, S&P said.

In its report, the rating agency also said the aforementioned estimate assumes MGM’s expectation that the project could be funded at 55 per cent debt to equity and added the casino operator believes its equity contribution could be spread over several years, perhaps 2024 to 2026.

The rating agency then referred to MGM’s outlook and said the casino operator’s significant equity contribution poses a potential leverage risk in future years, as it will not receive any cash flow benefits from the project. Nonetheless, if successful, S&P said the IR could expand MGM’s geographic reach and scale, and enhance its global brand reputation as a developer of integrated resorts.

The Osaka IR project is set to include three hotel products providing approximately 2,500 rooms, a MICE facility measuring 68,000 square meters, a 3,500-seat theatre, as well as various Japanese cultural experiences and retail facilities. It will also employ about 15,000 people.

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