MGM Resorts International (NYSE:MGM - News) recently announced the pricing of an $850 million offering of 8.625% senior unsecured notes. The notes will mature in 2019 and the company expects to close the transaction on January 17, 2012.
Apart from repaying a part of the company’s debt, the new credit facility will increase available fund and extend the maturity period of the debt. The company plans to use this new debt along with cash on hand to retire indebtedness under its senior credit facility or outstanding debt securities.
At the end of third quarter 2011, MGM Resorts’ total cash balance was $1.82 billion. Long-term debt outstanding was $13.1 billion. However, in September 2011, the company borrowed an additional $879 million under its senior credit facility to increase its capacity for issuing additional secured indebtedness. The borrowings were repaid immediately after quarter end.
At December 31, 2010, debt due within one year of the balance sheet date was classified as long term because the company had the ability to repay these amounts with available borrowings under the senior credit facility.
As of September 30, 2011, the company and its restricted subsidiaries were required to maintain a minimum trailing annual EBITDA of $1.15 billion under the senior credit facility, which increases to $1.2 billion as of December 31, 2011, with periodic increases thereafter. Additionally, the company and its restricted subsidiaries are limited to $500 million in annual capital expenditures during 2011. However, MGM Resorts complied with the maximum capital expenditure covenants.
MGM Resorts currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. The company’s close competitors include Wynn Resorts Ltd. (NasdaqGS:WYNN - News) and Las Vegas Sands Corp. (NYSE:LVS - News).
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