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When you're in Las Vegas, WHERE do you... [Continued]

Question of the Day November 25, 2014

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Now that it appears Caesars is heading into bankruptcy, how is the financial health of the other big players, MGM Mirage, Wynn and Las Vegas Sands?


When it comes to Wynn Resorts and Las Vegas Sands, "they’re almost polar opposites [to CET]from a balance-sheet perspective," says Union Gaming Group analyst Chris Jones, and "far better than Caesars," which has a heavy exposure to Atlantic City, isn’t in the "hot spots" in Las Vegas, and totally lacks a presence in China.

As indebted as Wynn and Sands are (according to Capital IQ, Wynn carries $7.3 billion in long-term debt, Sands $9.9 billion), their Macao foothold allows them "to de-leverage at an accelerated rate," says Jones. Despite an anti-corruption drive that has depressed the gambling market over there, "Macao is still driving accelerated cash flow at this point," and Jones feels the effects of that anti-corruption drive will be cyclical rather than permanent.

As for long-term debt, it may be a lot of money but – as a multiple of each company’s cash flow – it’s 1.4X for Wynn and 2.4X for Sands. By comparison, Caesars Entertainment’s debt-to-cash-flow ratio is 12.9-to-one. "That probably says it all right there," says Jones, citing more Capital IQ data.

Although MGM Resorts International is carrying $13.5 billion in long-term debt, "we have MGM at a positive," says Fitch Ratings analyst Alex Bumazhny. We’ve migrated it up to B+, which is in the mid-range for gaming companies." Bumazhny allows that he’s "a little bit concerned" about the debt, which MGM recently increased by issuing over $1 billion in notes to finance its Springfield, Massachusetts, casino project. The debt-to-cash-flow ratio is 7:1 but "there’s a lot of top-tier equity [in the company] and their maturities are pretty stretched out," Bumazhny says.

"They have a pretty full pipeline," with $5 billion in projects in Massachusetts, Maryland and Macao. "That’s why we’re not ready to pull the trigger on the double-B category" of bond rating, Bumazhny explains. "We’re pretty optimistic in the long term," he adds, although the company needs to raise another half-billion to get it through the next two years. "This should be manageable given MGM's improving financial profile and historically good access to capital markets, as well as Fitch [sic] favorable long-term outlook for the Las Vegas Strip and Macau," reveals a Fitch Ratings investor note.

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