Las Vegas Sun

September 21, 2019

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MGM Resorts sees stock slide for a second day

MGM Resorts International's stock fell again Thursday in heavy trading even as two debt-rating agencies applauded moves by the Las Vegas company to cut debt by issuing more stock to the public.

MGM Resorts stock closed Thursday at $11.56, down 4.46 percent. That followed Wednesday's 8.2 percent decline in reaction to news that the company intended to raise more than $500 million with a stock offering; as well as preliminary third quarter results.

Some 51.1 million MGM Resorts shares traded Thursday, making it one of the 10 most heavily-traded stocks on the New York Stock Exchange.

Also, Fitch Ratings assigned MGM Resorts a positive rating outlook. Its last rating report on June 29 didn't include an Issuer Default Rating outlook.

On Thursday, Fitch analysts said "the significant refinancing and capital raising efforts by MGM over the last 18 months have better positioned the company to survive its liquidity crunch and create a more sustainable capital structure."

Standard & Poor's Ratings Services, in the meantime, revised its rating outlook on MGM Resorts to stable from developing.

"The revision of the rating outlook to stable reflects some near-term improvement to MGM's still-weak liquidity profile following the recent pricing of a primary common stock offering, which will generate net proceeds in excess of $500 million," Standard & Poor's credit analyst Ben Bubeck said in a statement. "In addition, management continues to make progress toward other liquidity-enhancing transactions, including the sale of MGM's 50 percent ownership in Borgata Hotel Casino & Spa and related land, as well as an IPO of its Macau assets, which have the potential to further bolster liquidity in coming quarters ahead of significant debt maturities in 2011 and 2012."

On the downside, Standard & Poor's said: "The revision of the rating outlook to stable also reflects our assessment that rating upside potential no longer seems likely over the foreseeable future. While visitation trends to the Las Vegas Strip are improving and room rates are showing some resilience, continued depressed levels of spend per customer have driven weaker performance this year than the approximately 10 percent decline in EBITDA we previously incorporated into the rating for 2010."

EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.

"Following a decline in Strip property EBITDA of 22 percent during the first six months of 2010, the company recently announced preliminary results for the third quarter, which included a 16 percent decline in Strip property EBITDA. Given our economists' current expectation for only modest (2.2 percent) growth in consumer spending in 2011, as well as continued high unemployment, a substantial rebound in EBITDA generation next year seems unlikely, notwithstanding improving trends in group bookings," the agency said.

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