Moody’s Investors Service has downgraded the credit rating of the Mohegan Tribal Gaming Authority, which owns the Mohegan Sun after the Authority missed a debt payment.
MTGA missed a $19.7 million interest payment in April because of being forced to close the casino due to the Covid-19 pandemic.
Moody’s lowered the Authority’s bonds from B3 to Caa2, which is just three grades from the worst rating. According to Moody’s: “The downgrade reflects that significant pressure on earnings and free cash flow will increase leverage and elevate default risk.” It added, “The disruption in casino visitation is pressuring earnings and results 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. These efforts include mandates to close casinos on a temporary basis.”
The Mohegan Sun has been closed for about six weeks. Moody’s said the failure to make the payment “to the company’s 7.875% senior notes due 2024 reflects in part MTGA’s highly uncertain operating environment.”
The tribe said it expects to make the payment within the 30 day grace period.
Moody’s said the rating also reflected the expected effect on discretionary consumer spending that is expected to be sparked by the pandemic. It added, “Additionally, because of approaching October 2021 maturities and weak earnings, MTGA’s refinancing and default risk is high.”
