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Financial Outlook Improves for MGM Resorts International
as Anaylsts Shift Debt Rating Outlook to Positive

By Steve Green, Las Vegas SunMcClatchy-Tribune Regional News

Oct. 11, 2012--Wall Street analysts at Fitch Ratings today shifted their debt rating outlook on MGM Resorts International from stable to positive, signaling their confidence in continued financial improvements at the company and the rebound of tourism on the Las Vegas Strip.

"Fitch believes the fundamental outlook for the Las Vegas Strip remains among the safest markets in the U.S. for the balance of 2012 and 2013, supported by minimal supply growth for the foreseeable future," Fitch said in a report today. "With its recently completed/planned room remodels at Bellagio, MGM Grand and Mandalay Bay, MGM Resorts should benefit from the attractive supply/demand outlook on the Strip over the next couple of years."

Fitch noted, however, that amid U.S. economic uncertainty, "the Las Vegas Strip recovery trajectory slowed materially in the second quarter of 2012, and forward trends softened as the shorter-term group/business segment weakened."

On Wednesday, the Las Vegas Convention and Visitors Authority reported that visitation to the city through August was up 1.8 percent from the year-earlier period. About 26.7 million people came to Las Vegas during that period. On a year-to-year basis, monthly changes in visitation have ranged from 6.4 percent growth in February to 0.9 percent declines in January and April -- overall painting a picture of a slow, steady rebound.

With a hefty debt load of $13.2 billion as of June 30, MGM Resorts paid $560.7 million in interest during the first six months of 2012 and overall lost $362.7 million during that period.

But MGM Resorts' "adjusted EBITDA" -- a key financial measure covering operating results -- was $932 million in the first half of 2012, up from $688 million in the year-ago period. EBITDA means earnings before interest, taxes, depreciation and amortization.

Fitch noted that the casino resort operator has executed several deals this year to improve its financial position and could benefit from additional debt refinancings in 2013 and 2014 with "significant interest cost reductions."

The company benefits from its casino in the fast-growing Chinese gambling district of Macau. Also, room rates on the Strip have been picking up, and CityCenter's numbers look better as tourists return following the recession.

MGM Resorts also is pursuing growth opportunities in Massachusetts, Maryland and Toronto, which Fitch notes have "significant regulatory/licensing hurdles to overcome" and might involve financial partners to minimize the impact on the company balance sheet.

Fitch also affirmed MGM Resorts' key issuer default rating at "B-" and affirmed the "B-" issuer default rating on MGM Resorts' half-owned CityCenter complex. Those ratings are in the speculative range, which is not uncommon for casino operators.

Fitch commented that it's continuing with a stable outlook on CityCenter, as it has "adequate liquidity and a solid free cash flow profile."


(c)2012 the Las Vegas Sun (Las Vegas, Nev.)

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