Fitch Ratings affirmed a BB- rating for MGM Resorts International and its subsidiaries. The rating reflects MGM’s EBITDA leverage and places MGM’s stock into non-investment grade.

In addition to an Issuer Default Rating (IDR) of BB-, Fitch affirmed MGM’s senior secured debt at BB+ with a Recovery Rating of RR1. The unsecured debt, on the other hand, was rated BB-/RR4.

MGM’s Strengths Were Offset by Various Headwinds

Fitch explained that the rating reflects MGM’s mid-5x EBITDAR leverage. This rating took in mind the company’s international business, strong competitive position and diversification in Las Vegas and regional markets.

While MGM had many strengths, they were offset by the company’s active development plan, earnings volatility from high-end play in key markets, such as Las Vegas and Macau, increasing cost pressure, and lack of ownership of its properties.

Fitch warned that the aforementioned factors could significantly limit MGM Resorts’ financial flexibility during weaker economic conditions.

Fitch also reiterated a Stable Outlook for MGM, underscoring expectations that the operator’s leverage and liquidity will remain stable.

Fitch Highlighted Some of MGM’s Strengths

Fitch praised MGM’s strong scale and diversification efforts, calling it one of the “most diversified gaming operators in the US.” The company continues to dominate Las Vegas and grow in Macau. It also maintains its investments in key non-gaming revenue streams.

MGM’s conservative financial policy of net EBITDAR leverage below 4.5x differs from Fitch’s calculations as MGM capitalizes only cash lease payments and net cash against debt. The agency added that the operator has a policy of maintaining $3 billion of liquidity, with any excess available for growth initiatives and shareholder returns.

MGM furthermore boasts an asset-light structure and has monetized all of its meaningful wholly owned assets. This has resulted in a material increase in lease-equivalent debt somewhat offset by a reduction in traditional debt.

In the meantime, the company has benefitted from Macau’s strong post-COVID recovery, although it now faces certain headwinds in Las Vegas, which remains impacted by the pandemic.

Fitch also commented on MGM’s favorable asset mix and regional portfolio diversification. It also underscored an upside in the company’s digital presence as online betting and iGaming have expanded in the US.

Fitch applied the strong parent/weak subsidiary approach to MGM under its Parent and Subsidiary Linkage Rating Criteria.

Key Assumptions

Fitch forecasted flat revenues or negative 1% in 2025, expecting Sin City-related headwinds for the business. It forecasted EBITDAR margins in the 27% range for the company, total rent of $2.3 billion and Capex of $1-1.2 billion per year.

Fitch also assumed no dividend policy for the domestic entity and a $300-500 million share buyback program.

Fitch Gave Similar Score to Two of MGM’s Competitors

In the meantime, Fitch reiterated a BB-/Stable rating for Wynn Resorts, saying that the company’s business in Las Vegas and Macau remains strong but its debt will continue to increase because of large development projects.

Las Vegas Sands Corp., on the other hand, was given a BBB-/Stable rating. Fitch said that it remains the largest casino resort operator in Macau and is one of the only two casino resort operators in Singapore. Like MGM, the company has a commitment to conservative financial policy and also maintains very strong liquidity.