US tribal gaming operator Mohegan insists its Korean integrated resort, Mohegan INSPIRE, has sufficient cash and liquidity to continue operating despite revealing that lenders have knocked back multiple proposals to amend financial covenants.
The update was provided by Mohegan executives during its 4Q24 earnings call on Friday just a week after it was revealed the company was in default under the terms of a US$275 million “Korea Term Loan” for the US$1.6 billion Korean IR. Mohegan also warned last week that it would need to refinance a separate KRW1.04 trillion (US$704 million) Korea Credit Facility set to mature in November 2025 because it will otherwise not have sufficient liquidity to meet its debt obligations when they fall due.
Providing some clarity on the issue during Friday’s earnings call, Mohegan CFO Ari Glazer said the imminent debt covenant violation is related to provisions contained within loan documents requiring INSPIRE to achieve agreed financial targets and is not related to a missed payment, principal or interest.
“As is customary, we have negotiated in good faith to amend the covenants and give the business more time to ramp up and achieve its potential,” he said, noting that the 30 September covenant test was the first testing date since the property’s soft launch in November 2023.
“I can share that Mohegan has made multiple proposals to the HoldCo lenders with respect to an amendment, however the conditions required by the lenders have not been acceptable. We continue to negotiate in good faith with the HoldCo lenders to identify a solution although we cannot guarantee that we will be successful in doing so.
Glazer added that any failure to amend its Korea covenants “does not constitute a default under any of Mohegan’s other debt agreements or any of its subsidiaries in the United States or Canada.”
Despite the setbacks, the company maintains that the property itself has sufficient liquidity to continue operating while it ramps and does not need any additional financial support from the winder Mohegan group.
“Nothing has changed … in terms of where [INSPIRE is financially] and need for liquidity,” Glazer explained. INSPIRE has ample liquidity to continue operations as usual, there is sufficient cash on the balance sheet at INSPIRE for operations, so while we continue to work to optimize the capital structure and refocus on refinancing, we feel good about the business continuing to run as usual.”
Mohegan also stressed that upward momentum at INSPIRE continued through the December 2024 quarter – the first quarter of the company’s 2025 financial year – having recently reported net revenues of US$62.2 million in the three months to 30 September 2024. That improvement in revenues was reflected in better metrics across the board in the September quarter, with casino visitation hitting new highs of 30,729 in August and 32,043 in September. Hotel occupancy also hit an all-time high of 89.7% in August although fell away to 77.2% in September.
Mohegan COO Joe Hasson told analysts during Friday’s earnings call, “We continue to see the ramp … and those metrics continue to trend upwards. I can tell you they keep going upward through the [December] quarter. The greatest challenge for us [is] lower than expected table hold.
“The way we look at that is, we’ve cast a fairly wide net, a significantly wide net, recognizing that this is a foreigners-only casino, so we need to make sure that the entire region is introduced to the terrific resort that we’ve built and from there we will continue to stimulate that volume while finding profitability within that volume.”
As volume increases, Mohegan will look to increase profitability and address concerns around low hold at INSPIRE by “introducing games with higher hold, introducing games with side wagers that are more advantageous for the house and deploying talented resources to make sure we are dealing games in a way that is the standard,” Hasson said.
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