MGM China Highlights Debt Concerns Amidst Strong Performance

MGM China voiced concerns in a recent report on its “large indebtedness,” announcing that it might make servicing payments on unsecured notes challenging. The operator has a substantial debt load that includes borrowings and unsecured senior notes, totaling HK$19.1 billion ($2.44 billion) as of December 2023. This poses risks for financing endeavors and economic downturns.

According to the company’s 2023 annual report, these kinds of debts have the potential to significantly lower debt repayment capacities by compromising operational flexibility, competitiveness, and asset retention in the event of default.

Moreover, the existing indentures permit the incurrence of fresh debt, which could increase risks.

Even though 2023 was a record-breaking year with outstanding performance and industry outperformance, MGM China is concerned about its chances for future growth. Even though adjusted EBITDA reached a record high of HK$7.2 billion ($921 million), or 117 percent of 2019 levels, the corporation is still being careful when it comes to paying down its debt.

Interest rate swap agreements and a combination of fixed and variable rate borrowings are used by the company since market fluctuations in interest rates provide a significant risk. Even if fixed-rate debt instruments shield a company from interest rate swings in the short term, maturing debt and new acquisitions could expose it to changes in the future.

MGM China has implemented stringent credit monitoring procedures to lower the credit risk associated with VIP gaming clients and promoters. Credit limits, approvals, and debt recovery operations are overseen by a committed team that guarantees prompt action on past-due payments.

Effective debt management and risk reduction techniques are essential for MGM China to sustain its growth trajectory in the face of shifting market conditions as it navigates its financial landscape.”

Original Story by: Asian Gaming Brief