MGM Resorts International

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MGM China’s proposed U.S. dollar notes to have neutral impact on leverage: analysts

🏢 MGM China Holdings Ltd plans to issue US$750 million in senior unsecured notes due in 2033 for professional investors.

💰 The net proceeds from the new issuance will be used to repay a portion of the 2025 revolving credit facility and for general corporate purposes.

📅 The existing 2025 revolving credit facility has an aggregate amount of up to HKD23.40 billion (US$2.99 billion) maturing on April 15, 2030.

⚖️ Fitch Ratings assigned the proposed notes a 'BB-' rating with a recovery rating of 'RR4', matching the company's current stable issuer default rating.

📉 Analysts from CreditSights and Fitch expect the deal to have a neutral impact on MGM China's leverage ratios, which are estimated at 2.1 times.

📈 MGM China reported a 9.2% year-on-year increase in first-quarter revenue despite some profit headwinds from new branding fee arrangements with MGM Resorts.

🏆 Fitch noted that MGM China has strengthened its competitive position and stable free cash flow generation despite uncertainties in the Chinese economy.

💳 As of March 31, US$663.3 million of the 2025 revolving credit facility had been drawn by the company.

🔄 The company intends to use the revolving credit facility to repay its upcoming May 2026 bond maturity totaling US$750 million at 5.875% interest.

💹 CreditSights suggests that while talk places interest rates around 6.50%, fair value for comparable Macau operators is closer to 6.30%.

Bullish Signals
  • EBITDA increased 11 percent in 2025, demonstrating strong operational growth despite macroeconomic headwinds.
  • MGM China has performed well in the Macau market and strengthened its competitive position.
  • Fitch maintains a 'stable' outlook for MGM China's issuer default rating of 'BB-'.
  • Analysts noted that MGM China has 'improved competitive position', 'stable free cash flow generation', and strong access to capital markets.
  • Revenue posted a 9.2 percent year-on-year rise in the first quarter, indicating sustained demand.
  • MGM China successfully accessed US$750 million in new senior unsecured notes to refinance existing debt obligations.
Risk Factors
  • The proposed debt issuance involves US$750 million in new unsecured senior notes maturing in 2033, carried by Fitch at a 'BB-' rating and recovery rating of 'RR4', which remains speculative grade.
  • Fitch assigned an expected interest rate context where analysts suggest fair value is closer to 6.30%, indicating potential friction or higher cost relative to comparable high-yield peers around the anticipated 6.50% range.
  • The company relies heavily on its revolving credit facility, with US$663.3-million already drawn as of March 31, creating refinancing concentration risk ahead of the May 2026 bond maturity.
  • MGM China uses proceeds from the new notes to repay a portion of its 2025 revolving credit facility, which maintains gross leverage at approximately 2.1 times with no expected improvement in the forecast horizon.
  • Profitability is weighed down by new branding fee arrangements with MGM Resorts International, dampening earnings despite a reported 9.2% year-on-year revenue rise in Q1.
  • The firm faces operating uncertainty stemming from broader concerns about the Chinese economy and a highly promotional casino environment in Macau.
Full Analysis
MGM China Holdings Ltd. plans to issue US$750 million in senior unsecured notes due in 2033 to repay a portion of its outstanding 2025 revolving credit facility and for general corporate purposes. CreditSights and Fitch Ratings assessed the proposal, noting that while the interest rate might be around 6.50 percent, fair value could be closer to 6.30 percent based on comparable Macau casino operators. The notes are expected to have a neutral impact on leverage, with gross leverage projected to remain near 2.1 times. Fitch assigned the new US$750 million notes a 'BB-' rating and RR4 recovery rating, maintaining its long-term issuer default rating at 'BB-' with a stable outlook for both MGM China and parent company MGM Resorts International. The analyst firm highlighted MGM China's strong refinancing ability driven by improved competitive positioning, stable free cash flow generation, and access to capital markets despite uncertainty in the broader Chinese economy. Financial performance remains solid, with first-quarter revenue rising 9.2 percent year-on-year, though profitability was slightly affected by new branding fee arrangements with MGM Resorts. The Macau unit operates key properties including MGM Macau on the peninsula and MGM Cotai in the casino district, which reported an 11 percent increase in EBITDA for 2025. Currently, US$663.3 million of the revolving credit facility has been drawn as of March 31, with proceeds from the new notes intended to facilitate repayment of upcoming debt maturities, including a US$750 million bond maturity scheduled for May 2026.