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New credit agreement to help MGM complete $2.9 billion Macau resort

15 Jun 2015

By Howard Stutz
MGM Resorts International said Friday it refinanced its credit agreement surrounding its Macau subsidiary, which will be used to help complete the company’s $2.9 billion resort under construction on the Cotai Strip.

The company said its credit agreement increased to $1.55 billion and added a $1.45 billion revolving line of credit. The maturity date of the was extended to 2019.

MGM Resorts, which owns 51 percent of MGM China, said the funds would also be used to refinance its MGM Macau resort and for general corporate purposes.

MGM China CEO Grant Bowie said the $3 billion refinancing “will provide our company the financial flexibility to invest in MGM Macau and develop our second property.”

MGM Cotai is expected to open in 2016.

The project is one of three resorts under construction by the Nevada-based companies with large holdings in Macau. Las Vegas Sands Corp. is building the $2.7 billion The Parisian Macao, which will have a half-scale Eiffel Tower, while Wynn Resorts Ltd. is building the $4 billion Wynn Palace.

The Chinese gaming market has been decimated in the last year after the Chinese government cracked down on corruption among the high-end junket operators. A dip in the Chinese economy has also contributed to a 37 percent decline in gaming revenue over the last 12 months.

Wells Fargo Securities gaming analyst Cameron McKnight told investors Friday he expects Macau gaming revenue to decline between 34 percent and 38 percent in June, which would mark the market’s 13th straight monthly drop.

McKnight said the revenue declines have taken their toll on the junket operators, who bring big-money players to Macau’s private gaming salons. He cited reports from trade union leaders who expect two junket operators to collectively lay off 400 workers.

“In our view, potential staffing reductions reflect the current reality of the VIP business,” McKnight said.

He also cited a report posted on China’s Central Bank website that showed economists have lowered their 2015 growth forecast to 7 percent from 7.1 percent. The report noted that industrial production, exports, and investment in property and manufacturing have been below projections.

“In addition, the report noted that certain banks have been taking a more cautious stance in extending credit,” McKnight said.

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