{"id":132997,"date":"2020-04-14T08:51:28","date_gmt":"2020-04-14T15:51:28","guid":{"rendered":"https:\/\/www.casino.org\/news\/?p=132997"},"modified":"2020-04-14T11:40:36","modified_gmt":"2020-04-14T18:40:36","slug":"mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating","status":"publish","type":"post","link":"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/","title":{"rendered":"MGM Credit Rating Confirmed by Moody’s, but Outlook Cloudy With Chance of Downgrade"},"content":{"rendered":"

MGM Resorts International’s (NYSE:MGM) credit rating was confirmed at \u201cBa3\u201d by Moody’s Investors Service. But that confirmation came with a \u201cnegative\u201d outlook, indicating the Mirage operator isn’t yet out of the woods when it comes to a downgrade.<\/p>\n

\"MGM
Bellagio operator MGM is staring down a possible credit downgrade, says Moody’s. (Image: CNBC)<\/figcaption><\/figure>\n

With US casinos shuttered by the coronavirus, ratings agencies are issuing lower grades on debt issued by gaming operators. They are hitting those companies with \u201cnegative\u201d outlooks or both, as the industry grapples with a zero-revenue scenario, with no near-term end in sight. Moody’s call on MGM comes about three weeks after Fitch downgraded<\/a> the Mandalay Bay operator, also tagging it with a \u201cnegative\u201d outlook.<\/p>\n

The confirmation of the company’s Ba3 corporate family rating (CFR) reflects MGM’s good liquidity, including sizable cash balances, aided by revolver drawdowns, and the ability to withstand a meaningful but temporary cash burn from weakened operating performance and facility closures related to the coronavirus,\u201d said Moody’s in a note obtained by Casino.org.<\/i><\/p><\/blockquote>\n

MGM’s grade has \u201cspeculative elements\u201d and \u201cis subject to substantial credit risk.\u201d At \u201cBa3\u201d on the Moody’s scale, the gaming company has the lowest of the three \u201cBa\u201d ratings and is just one notch above \u201cB\u201d status \u2013 grades that carry high credit risk.<\/strong><\/p>\n

Lacking Visibility<\/h2>\n

Credit raters are proving eager to assign<\/a> \u201cnegative\u201d outlooks and lower ratings to gaming companies. That’s because there’s little visibility as to when the US economy will reopen and how the casino business will look after that happens. Gaming venues in Nevada \u2013 the largest domestic gaming market \u2013 are expected to remain closed through the end of April, but that timeline was already pushed back once and now states are also extending coronavirus closures.<\/p>\n

\u201cThe negative outlook reflects the uncertain duration and recovery from the coronavirus-related earnings and cash flow pressure, which will lead to higher debt (from the revolver draw or other debt offerings) and leverage even when property earnings recover,\u201d said Moody’s. \u201cEarnings will decline due to the disruption in casino visitation resulting from efforts to contain the spread of the coronavirus, including recommendations from federal, state and local governments to avoid gatherings and avoid non-essential travel.\u201d<\/p>\n

\n

During the COVID-19 shutdown, operators are scrambling to bring cash onto their balance sheets, work with creditors on debt covenants, and reduce costs, prompting some analysts to speculate<\/a> dividend payers in the group, including MGM, could eliminate their payouts.<\/p>\n<\/div>\n

MGM stock yields 4.31 percent. The company hasn’t commented on its payout, but it did scrap a $1.25 billion buyback plan last month.<\/p>\n

A New Normal?<\/h2>\n

Potentially weighing on consumer discretionary companies, including gaming operators, is that when the coronavirus situation eases, consumer spending tastes may shift. Over the past three weeks, nearly 17 million Americans filed for jobless benefits, indicating that if casinos, movie theaters, and theme parks soon reopen, audiences for those activities could be limited.<\/p>\n

\u201cThe negative outlook also reflects the negative effect on consumer income and wealth stemming from job losses and asset price declines, which will diminish discretionary resources to spend at casinos once this crisis subsides,\u201d said Moody’s. \u201cMGM remains vulnerable to travel disruptions and unfavorable sudden shifts in discretionary consumer spending and the uncertainty regarding the timing of facility re-openings and the pace at which consumer spending at the company’s properties will recover.\u201d<\/p>\n

The research firm acknowledges an upgrade for MGM isn’t likely over the near-term. But it’s possible if the operator can effectively manage debt and fixed costs, among other considerations.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

MGM Resorts International’s (NYSE:MGM) credit rating was confirmed at \u201cBa3\u201d by Moody’s Investors Service. But that confirmation came with a \u201cnegative\u201d outlook, indicating the Mirage operator isn’t yet out of the woods when it comes to a downgrade. With US casinos shuttered by the coronavirus, ratings agencies are issuing lower grades on debt issued by […]<\/p>\n","protected":false},"author":46,"featured_media":132999,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[62,10],"tags":[],"acf":[],"yoast_head":"\nMGM Has a Tenuous Grasp on Already Flimsy Credit Rating<\/title>\n<meta name=\"description\" content=\"MGM Resors credit rating is already in junk territory and Moody's sees a possibility of a downgraded int the operator's future.\" \/>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"MGM Has a Tenuous Grasp on Already Flimsy Credit Rating\" \/>\n<meta property=\"og:description\" content=\"MGM Resors credit rating is already in junk territory and Moody's sees a possibility of a downgraded int the operator's future.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/\" \/>\n<meta property=\"og:site_name\" content=\"Casino.org\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Casino.OrgNews\" \/>\n<meta property=\"article:published_time\" content=\"2020-04-14T15:51:28+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-04-14T18:40:36+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/04\/mgm.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1910\" \/>\n\t<meta property=\"og:image:height\" content=\"1000\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Todd Shriber\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@etfgodfather\" \/>\n<meta name=\"twitter:site\" content=\"@Casino_Org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Todd Shriber\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/\",\"url\":\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/\",\"name\":\"MGM Has a Tenuous Grasp on Already Flimsy Credit Rating\",\"isPartOf\":{\"@id\":\"https:\/\/www.casino.org\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/04\/mgm.jpg\",\"datePublished\":\"2020-04-14T15:51:28+00:00\",\"dateModified\":\"2020-04-14T18:40:36+00:00\",\"author\":{\"@id\":\"https:\/\/www.casino.org\/news\/#\/schema\/person\/f4cecf70a5032bc4e60eb73fc86d4a85\"},\"description\":\"MGM Resors credit rating is already in junk territory and Moody's sees a possibility of a downgraded int the operator's future.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.casino.org\/news\/mgm-has-a-tenuous-grasp-on-already-flimsy-credit-rating\/#primaryimage\",\"url\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/04\/mgm.jpg\",\"contentUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2020\/04\/mgm.jpg\",\"width\":1910,\"height\":1000,\"caption\":\"Bellagio operator MGM is staring down a possible credit downgrade, says Moody's. 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