MGM Resorts International, seeking to shore up its balance sheet with its casinos nationwide closed since mid-March, was hoping Thursday morning to raise $500 million in new debt.
By the time the markets closed in the afternoon, the company had raised $750 million.
In a filing with the Securities and Exchange Commission, the Las Vegas-based company said it currently has $6 billion in cash on its balance sheet, which includes more than $3.6 billion in recent drawdowns. The company said none of its current $11.8 billion of long-term debt comes due until 2022. The proposed $750 million in new debt would come due in 2025.
The transaction is expected to close May 4.
In a statement, MGM said it would use the debt “for general corporate purposes,” primarily to increase its “liquidity position.”
MGM, which operates more than two dozen gaming and non-gaming properties in six states, said it is spending $270 million a month in efforts to keep the properties ready when lockdowns due to the COVID-19 coronavirus pandemic are lifted.
“The proposed capital raise makes a strong financial position stronger,” Jefferies gaming analyst David Katz told investors Thursday. “The near-medium-term outlook for the business remains highly questionable. Taken in total, we believe the update supports our positive view, which is (that) MGM can endure until recovery is clearer.”
As part of the filing, MGM preannounced first-quarter results, saying its net revenue was down 29% to $2.3 billion because of the COVID-19 disruptions to operations in both Macau and the U.S. from January through March. MGM said revenues from its Strip resorts, including Bellagio and MGM Grand, declined 21%. Regional gaming properties, including Beau Rivage in Biloxi, Mississippi, and MGM National Harbor and Maryland, were down 10%.
The company will report first-quarter earnings on Thursday.
MGM also told investors it has seen a high level of hotel room and convention cancellations into September, but that some of this demand is now moving into the last three months of 2020 and the beginning of 2021.
“There have not been meaningful cancellations for 2021 related to the COVID-19 pandemic,” the company said in the filing.
MGM, which furloughed 60,000 of its 69,000-person workforce nationwide but has raised $12.5 million for an employee relief fund, outlined several steps it has taken in wake of the pandemic, including the reduction or deferral of at least 50% of planned capital expenditures and its company executives exchanging their salaries for stock.
Meanwhile, MGM said it is working closely with government officials on reopening plans in each of its six states, including Nevada, where the company operates 13 gaming and non-gaming properties on the Strip.
“We cannot predict the duration of the shutdowns or any limitations the government may impose on our operations when we are able to re-open,” the company said. Restrictions could include a limit on the number of seats per table gaming, slot machine spacing, temperature checks, mask protection, and social distancing measures at restaurants and entertainment venues.
The company said it expects to see weakened demand at properties due to continued domestic and international travel restrictions, reduced consumer spending, and general economic uncertainty.
Analysts agreed. SunTrust Robinson’s Barry Jonas said a comeback by Strip resorts when they are cleared to reopen will be a slow process.
“We continue to have concerns over the long-term demand profile once casinos reopen on the Strip,” Jonas told investors. “We think a return to normalized levels could take some time versus regional markets, given the Strip’s exposure to fly-to and corporate visitation, as well as relative non-gaming and table games exposure.”
Macquarie Securities gaming analyst Chad Beynon said MGM’s comments reflect the U.S. market reflected statements from Las Vegas Sands executives, who said casinos in Macau and Singapore will recover much more quickly than U.S. gaming markets.
In its pre-earnings announcement, MGM said net revenues from its two Macau casinos would be down roughly 63% to $272 million.
The pandemic halted Macau’s Chinese New Year celebrations and caused the closure of all Macau casinos for 15 days in February. Meanwhile, continued travel restrictions in China have softened Macau visitation into April.
Shares of MGM, traded on the New York Stock Exchange, closed at $13.77 Thursday, up 48 cents or 3.61%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
