U.S.-based casino giant MGM Resorts International could be on the hook for US$2 billion to US$2.5 billion in equity to build an integrated resort (IR) in Osaka, Japan. The figure, cited by GGRAsia, originated with S&P Global Ratings Inc.
Osaka lawmakers chose the development team of MGM Resorts and Japan’s Orix Corp. as its partners in the bid, which was submitted to the central government last year, along with a bid from Nagasaki. If approved, the plans would create the first legal casinos in Japan.
S&P’s calculations are “based on the estimated US$10 billion development cost” and assumes “MGM’s expectation that the project could be funded at 55 percent debt to equity.”
Osaka’s proposed resort would be built on Yumeshima, a man-made island in Osaka Bay. Nagasaki, working with Casinos Austria and partners, would be developed near the Huis ten Bosch theme park in Sasebo City.
S&P suggested the Osaka IR will not break ground until late 2023 or 2024, with a tentative opening date sometime in 2029. The agency said it believes MGM’s ownership stake “will be no more than 50 percent.”
According to previously-disclosed information, MGM and Orix would each own 40 percent of the consortium, while local investors will own the remaining 20 percent. “However, if the consortium does not bring in additional investors, MGM’s and Orix’s ownership would each increase to 50 percent,” wrote S&P.
“MGM’s sizable equity contribution represents a possible leveraging risk over the next few years as MGM will not receive any cash flow benefits from the project,” it added. “Nevertheless, if successful, the resort could broaden MGM’s geographic reach and scale and enhance its global brand reputation as an integrated resort developer.”
