Fitch Ratings has affirmed MGM China’s rating at “BB” on the back of predicted Macau gaming revenue growth of 12% through 2017.
The agency said on Tuesday that it held a positive view of MGM Resorts’ development pipeline over the next 18 months, which includes the opening of MGM Cotai in late 2017 as well as its latest US projects – MGM National Harbor and MGM Springfield. Fitch also affirmed both MGM Resorts and MGM China’s senior secured credit facility at “BBB/RR1” with the outlook “stable.”
Looking specifically at Macau’s projected growth, “the agency expects about an equal contribution from VIP and mass market towards achieving growth forecast (12%), though the recovery in the VIP segment has mainly benefited Wynn Resorts and Studio City thus far.
“Fitch expects the new supply introduced in 2015 to 2017 to produce some incremental demand for the overall market. However, Fitch does not anticipate these projects to ramp up to their full potential until later in the decade when major transport infrastructure comes online.”
Fitch said it assumed MGM China generating around US$700 million of EBITDA in 2018, which factors in US$220 million at MGM Cotai and approximately 15% EBITDA decline at MGM Macau.
It added that the three new properties currently under construction in Macau and the US, “will improve MGM’s overall geographic diversification and expand its ‘M life Rewards’ program, similar to MGM’s Borgata purchase in 2016.
“Once complete, MGM will have two assets in Macau and three assets along the US East Coast. Fitch generally expects good return on investment for the three development projects.”
