Further access to credit
MGM China Holdings has been given access to a new revolving credit facility worth HKD2.34bn ($302m). The Macau-based casino operator announced the arrangement on Tuesday.
The funds will go toward ongoing working capital needs and other general purposes for the company. The loan matures on May 15, 2024 as per MGM China’s filing with the Hong Kong Stock Exchange.
MGM China could gain access to an increased sum of HKD3.9bn ($503m) if certain conditions are met
The facility also includes an option in which MGM China could gain access to an increased sum of HKD3.9bn ($503m) if certain conditions are met. No details were given as to what these requirements may be.
Conditions of the loan
This revolving credit facility will be subject to a fluctuating rate of interest each year, based on the Hong Kong interbank offered rate (HIBOR), as well as a margin of between 1.625% and 2.75%. The exact margin level will depend on the leverage ratio of the company.
This latest revolving credit facility will need to be prepaid if the United States-based casino company MGM Resorts International “ceases to be the legal and beneficial owner directly or indirectly of more than 50 percent of the issued share capital” of MGM China.
Coronavirus pandemic impact
Just like all casino companies, MGM China has been hit hard by the coronavirus pandemic. Due to ongoing restrictions, visitor traffic at MGM’s casinos in China has been very low, with casino revenues also having dropped significantly in the past few months.
First quarter revenues for MGM China were less than $271.9m, which is a year-on-year decrease of 63%. Casinos in Macau were closed for 15 days in February in an attempt to suppress the spread of the virus.
In April, casino revenues were down 97% on the island
Though the casinos opened after the two-week shutdown, there are still significant restrictions in place at the borders and the capacity of the casinos is limited. In April, casino revenues were down 97% on the island.
MGM China is also searching for a replacement for longtime CEO Grant Bowie, who is stepping down from his role on May 31. There has been no successor named yet for the position.
MGM Resorts International’s casinos in the United States have been closed since the middle of March, with states only now starting to allow casinos to reopen.