MGM Resorts Announces $750M Public Offering of Senior Notes

Outside of MGM in Las VegasLast week, MGM Resorts International announced a $750M public offering of senior notes due in 2028. The move is seen as an act from MGM to boost its liquidity with the company suffering significant losses this year due to the COVID-19 pandemic.

Per an official statement from MGM:

“The notes being offered will be general unsecured senior obligations of the Company, guaranteed by substantially all of the Company’s wholly owned domestic subsidiaries that guarantee the Company’s other senior indebtedness, and equal in right of payment with all existing or future senior unsecured indebtedness of the Company and each guarantor.”

An Increase From $500M

Last Thursday, MGM initially announced plans for a public offering of $500M in aggregate amount of 4.750% senior notes due in 2028 at par. The gambling company later upsized the original aggregate principal to $750M. The transaction is expected to close on October 13, 2020 but subject to customary closing conditions.

BofA Securities, Inc., J.P. Morgan Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., BNP Paribas Securities Corp., Citizens Capital Markets, Inc., Fifth Third Securities, Inc., Scotia Capital (USA) Inc. and SMBC Nikko Securities America, Inc. will act as joint book-running managers and Credit Agricole Securities (USA) Inc., Truist Securities, Inc., Comerica Securities, Inc. and Union Gaming Securities, LLC will act as co-managers for the proposed offering.

According to a press released from MGM, the company intends to use the net proceeds from the offering of the notes for general corporate purposes. This could include the refinancing of existing debts and investment in short-term interest-bearing accounts and/or securities.

Significant Losses

Last June 30th, MGM’s total indebtedness was valued at $11.4B. This included an aggregate of $3.7B at the MGP Operating Partnership and an outstanding balance of $2.5B at MGM China. The company’s liquidity was placed at $8.1B and these consisted of cash, cash equivalent, and amounts under its revolving credit facilities.

For the second quarter of 2020, MGM reported a net loss of $857M which was a stark contrast from the $43M income in posted for the period of April-June 2019. Likewise, diluted loss per share was at $1.67 as compared to earnings of $0.08 per share for the second quarter of last year. For the first half of 2020, MGM reported a total net loss of $50.4M. During the same period last year, the company posted a net income of $74.9M

The company is set to release its third quarter results later this month. But despite their casinos returning for operations after months of stoppage, the company is expecting significant losses due to the effects of the coronavirus pandemic and the subsequent imposition of health and safety measures.

BetMGM Doing Well

But while MGM’s land-based casinos have struggled due the pandemic, MGM’s online betting venture BetMGM is doing well and continues to show significant growth with punters shifting to online gamblig during these pandemic-hit times.

In a trading update released by GVC last week, BetMGM is performing better than expected so far for the current year. The estimated net revenue for 2020 is now in the vicinity of $150M-$160M. MGM’s betting app is now live in a total of 8 states and has captured a market of 17% in those areas.

MGM and GVC launched BetMGM in 2018 and relaunched it last year with a new platform. The new look seemed to work and aided by the pandemic, it has doubled its market share in Las Vegas to 22% from the start of the year through August 2020. In New Jersey, BetMGM also captured 10% of the market share in online sports betting and 24% of retail sports betting.