As hard as the Covid-19 pandemic has hit MGM Resorts International, forcing the closure of its more than 20 gaming resorts nationwide, the
casino giant says it believes it’s in a strong enough cash position to “weather this downturn and ultimately rebound.”
The Las Vegas-based operator said in a statement that it has around $3.9 billion on its balance sheet, including approximately $1.5 billion drawn under its revolving credit facility, and doesn’t have any debt repayments due until 2022.
“While this will undoubtedly have a significant negative effect on our business in the near term, we are well-positioned to emerge from the current crisis in light of our strong liquidity position and valuable asset portfolio,” said President Bill Hornbuckle, who has been serving as acting CEO since James Murren’s departure at the end of March.
The big question is long the crisis will last. Macquarie Securities gaming analyst Chad Beynon said MGM is burning through $14.4 million a day to maintain the company, which would give it approximately nine months before it runs out of cash. Deutsche Bank gaming analyst Carlo Santarelli said MGM could withstand a “roughly 10-month closure of its domestic assets before having to resort to further sources of liquidity.”
Currently, only MGM’s two Macau casinos are generating revenue, but the industry there was shut for two weeks in February and patronage has been scanty since, with visitation from its core mainland China market largely halted to contain the spread of the potentially lethal virus.
The company has fixed rent payments for the remainder of 2020 of approximately $184 million and $219 million under its sales and lease-backs of Bellagio, MGM Grand Las Vegas and Mandalay Bay to two real estate investment trusts. MGM also has fixed rent payments of $621 million for the rest of the year under its master lease with MGM Growth Properties, a separately REIT created by MGM in which the company owns roughly 60 percent, which could be converted under previous agreements into up to $1.4 billion in cash.
It could also draw additional liquidity from the properties it still owns MGM Springfield in Massachusetts, its 50 percent interest in the CityCenter resort complex on the Las Vegas Strip, and its 55.95 percent interest in MGM China, the Hong Kong-listed holding company for the Macau casinos.
The company said 60 to 70 percent of its operating expenses are variable and it is looking at ways to minimize costs by way of hiring freezes, furloughs and other job reductions. It also plans to delay 33 percent of the capital expenditures that were planned for its U.S. properties this year.
“We believe the company will be able to manage its expenses while navigating this unprecedented event,” Hornbuckle said. “We are currently making very difficult decisions, but believe these will be in the best interest of the company long term.”
Although casinos are one of the many distressed sectors of the economy that are expected to take advantage of the $2.2 trillion federal rescue package signed into law by President Trump on March 27, MGM said last week it will not accept any of the money being made available, although it will consider accepting the loan guarantees the government is offering should the pandemic force the industry to remain closed for an extended period.
Las Vegas Sands, which is enduring the shutdown of its two Strip resorts and has been especially hard-hit by the slowdown in Macau, its principal source of revenue, likewise said it does not plan to accept any of the bailout money. The company also said last week that it was still paying its employees and hadn’t cut staff.
Sheldon Adelson, the company’s billionaire chairman and CEO, was reported to have made calls to garner support for the rescue package in his role as one of the Republican Party’s largest donors.
Murren also was an important player in the industry’s lobbying for the aid and traveled to Washington to meet with Trump as the legislation was winding its way through Congress.
