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Rating Action:

Moody's assigns a Ba3 to MGM Resorts proposed unsecured notes issued by MGM China sub

30 Apr 2019

New York, April 30, 2019 -- Moody's Investors Service ("Moody's") today assigned a Ba3 rating to the proposed senior unsecured notes to be issued by MGM China Holdings Limited, a 55.95% owned discretely financed publicly traded subsidiary of MGM Resorts International. MGM China owns and operates two resort casinos in Macau, China that account for approximately 20% of MGM Resorts consolidated EBITDA. Moody's also affirmed MGM Resorts Ba3 Corporate Family Rating, Ba3-PD Probability of Default Rating, Ba3 senior unsecured ratings and Speculative Grade Liquidity rating of SGL-1. The outlook is positive. The affirmations reflect Moody's view that credit metrics will improve over the next 12 -- 18 months due to higher earnings contributions from the ramp up of MGM Cotai and modest growth at domestic properties.

Proceeds of the proposed notes will be used to repay MGM China's existing secured credit facility thereby materially extending the subsidiary's maturity profile to 2024 and 2026 from the current bullet maturity in 2022 and beyond the date for renewal of the Macau sub-concession agreements in 2022.

The Ba3 assigned to MGM Resorts' and MGM China's proposed unsecured notes is based on a one-notch override of Moody's Loss Given Default (LGD) model indicated rating of B1. Moody's decision to override the LGD model reflects the close proximity of the expected loss rate (within the stability band) to the Ba3 rating level and our expectation that MGM Resorts will continue to shift its capital structure to predominately unsecured over time. MGM China does not provide any guarantees to MGM Resorts other subsidiaries, and so creditors of MGM China will continue to have direct claim position with regards to MGM China's cash flows and recovery prospects. Similarly, MGM Resorts does not provide any guaranty to MGM China, and its creditors continue to have a direct claim with respect to MGM Resorts cash flows and recovery prospects.

MGM Resorts' and MGM China's total debt is 43% secured and 57% unsecured (assuming full draws of existing revolvers). On a pro-forma basis 34% is secured and 66% is unsecured.

As of a result of this transaction, MGM China's pro-forma debt structure will be split 58% secured and 42% unsecured thereby providing coverage for both classes of debt.

Assignments:

..Issuer: MGM China Holdings Limited

....Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD4)

Outlook Actions:

..Issuer: MGM Resorts International

....Outlook, Remains Positive

Affirmations:

..Issuer: MGM Resorts International

.... Probability of Default Rating, Affirmed Ba3-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-1

.... Corporate Family Rating, Affirmed Ba3

....Senior Unsecured Shelf, Affirmed (P)Ba3

....Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 (LGD4)

RATINGS RATIONALE

MGM (Ba3 positive) benefits from large scale, a diversified presence on the Las Vegas Strip across multiple customer segments, a solid position within several regional markets, and its presence in the large Macau market with favorable long-term prospects.

MGM is constrained by its concentration in Las Vegas (approximately 61% of consolidated 2018 Adjusted EBITDA), exposure to the Macau gaming market that is experiencing volatility and the ramp-up risk associated with recent resort developments - MGM Cotai (opened in Q1 2018) and MGM Springfield (opened in August 2018) and the redeveloped Park MGM (completed in December 2018) and the integration of recent acquisitions (Empire City and MGM Northfield Park).

Consolidated and restricted group leverage and coverage are expected to continue to improve due to material earnings growth in 2019 and 2020 principally from the ramp-up of MGM Cotai and secondarily from recently completed projections, acquisitions and modest organic growth and operational efficiencies related to the recently-announced MGM 2020 plan. The company's financial policy targets is to maintain consolidated net debt/EBITDA in a range of 3.0 - 4.0x by 2020; which roughly translates to 4.5x -5.5x on a Moody's adjusted basis. Moody's expects MGM will actively pursue other large integrated resort development projects (e.g. Japan) that would require significant equity investment and debt to finance construction and will continue to expand its domestic operations in partnership with MGM Growth Properties, LLC.

The positive outlook reflects our view that consolidated operating results will improve over the next year due to higher domestic earnings, operational efficiencies achieved through the company's MGM 2020 plan and contribution from recent acquisitions and new project openings in Massachusetts, Las Vegas, and Macau that will result in an improvement in credit metrics to levels supportive of a higher rating.

Ratings could be upgraded if: Consolidated debt/EBITDA is sustained below 5.0x, fixed charge coverage remains above 2.0x; the company maintains sufficient liquidity to support both recourse and non-recourse subsidiaries; operating results of MGM China operations, including MGM Cotai, track to estimated levels and share repurchases are funded with asset sale proceeds or cash on hand rather than debt. The credit ratios required for an upgrade also takes into account that reported credit metrics may experience some variability due to the timing of new resort openings and the closing of the announced and potential acquisitions.

Ratings could be downgraded if the result of the independent board includes returns to shareholders that would delay the improvement in credit metrics, operating results from new project openings fall materially below estimates, if consolidated gross debt/ EBITDA is sustained above 6.0x, if EBITDA/fixed charges declines below 1.75x or the company deviates materially from its financial policy goals.

MGM owns and operates the Bellagio, MGM Grand, Circus Circus located on the Las Vegas Strip in Nevada and MGM Springfield in Massachusetts which opened in late 2018. MGM owns approximately 56% of MGM China Holdings Limited, which owns the MGM Macau resort and casino and MGM Cotai which opened in February 2018. MGM also owns 50% of CityCenter in Las Vegas and approximately 69% of MGM Growth Properties (MGP), a real estate investment trust formed in April 2016. MGM has entered into a long-term triple net master lease with MGP pursuant to which the company leases and operates for MGP fourteen properties. Consolidated net revenues for the LTM period ended March 31, 2019 were approximately $12.1 billion.

The principal methodology used in these ratings was Gaming Industry published in December 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peggy Holloway
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Janice Hofferber, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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