In order to reduce debt,
MGM Resorts International
) recently announced that it will offer senior notes worth $700.0
million in a private placement. These notes will mature in 2020 and
will be offered to institutional buyers as well as "U.S. persons"
residing outside the U.S. The rate of interest was not disclosed.
LAS VEGAS SANDS (LVS): Free Stock Analysis
MGM RESORTS INT (MGM): Free Stock Analysis
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It is expected that the company will use the net proceeds to
decrease borrowings under its senior credit facilities or
outstanding debt securities.
As of June 30, 2012, MGM Resorts had a long-term debt outstanding
of $13.2 billion, down from $13.5 billion as of December 31, 2011.
The company exited the second quarter with $1.73 billion in cash
and cash equivalents, down from $1.87 million reported in 2011.
The company remains focused on balance sheet improvement by
rearranging its debt profile. The move involves interest rate cut
as well as maturity period extension. In January, MGM issued an
$850 million offering of 8.625% senior unsecured notes, which will
mature in 2019. In March, the company issued $1 billion of senior
notes at 7.75% due 2022. This was the company's lowest bond yield
issuance since 2007. The company also amended and extended its
senior credit facility to February, 2015. In March, it repaid the
non-extending portion of the bank term loans. As a result of these
transactions, the interest rate on the company's extended $1.8
billion credit facility declined 200 basis points to 5% in
mid-April. These actions resulted in substantial annual interest
rate savings. Going forward, MGM expects to utilize additional
opportunities to further reduce borrowing costs and augment overall
free cash flow levels.
We believe MGM Resorts is ideally positioned to take advantage of
both domestic and international opportunities. Moreover, the
acquisition of a controlling interest in MGM China will likely
strengthen its position in Macau and ensure higher profitability.
With no new supply in the Las Vegas market, a moderate pickup in
visits will augur well for the company in the domestic arena.
Remodels at Bellagio and MGM Grand will likely drive the pricing
power ahead. However, expected decline in market share in
Macau due to increased supply and decelerating growth in China make
us cautious. Furthermore, slowdown in consumer discretionary
spending in the U.S. will likely lead to a muted RevPAR growth in
the third quarter. Hence, we maintain our Neutral recommendation on
Currently, MGM Resorts, which competes with the likes of
Las Vegas Sands Corp.
), carries a Zacks #3 Rank, implying a short-term Hold rating. Our
long-term recommendation on the stock remains Neutral.