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Forecast on MGM’s spending in Osaka
Standard & Poor’s Global Ratings is one of the top 4 international financial rating companies. Recently, the company took an interest in the hotel-casino project developed by the MGM Resorts International Group in the city of Osaka, Japan.
According to her, the American operator would have to spend between 2 and 2.5 billion dollars in equity to build this land-based casino, if it is finally authorized by the Japanese government.
55% debt financing
To develop its hotel-casino project in Osaka, the MGM Resorts International group has approached the Japanese financial services group Orix Corporation. It is already known that the participation of each of them will not exceed 50% and should rather turn around 40%. The remaining 20% is to be financed by local investors.
Also, it was previously announced that the construction of the gaming facility has been budgeted at about $10 billion. And then MGM Resorts International has indicated that it plans to finance up to 55% of the project through debt.
As a result, Standard & Poor’s Global Ratings estimates that the operator would have to spend between $2 billion and $2.5 billion in equity to develop this hypothetical hotel-casino. Its capital contribution could be spread over several years, perhaps between 2024 and 2026.
So, according to the financial rating company, it should take several years for MGM Resorts International to finally generate cash flow from the resort. Thus, the group is not likely to reap immediate benefits.
However, the resort could pay dividends in the long term and strengthen its geographic presence in the region.
An opening that should not occur before the end of the decade
Of course, all this is to be taken in the conditional. Indeed, we don’t even know yet if the project will get the authorization of the national government. The latter was originally supposed to rule at the end of last year.
Nevertheless, there have been further delays and the final decision is now expected in the second quarter of 2023.
As a result, Standard & Poor’s Global Ratings does not expect MGM Resorts International Group to begin spending until late 2023 or early 2024.
Because the hotel-casino is scheduled to take several years to build, it’s not likely to open until later this decade. In short, it will be a long time before the operator will be profitable in this business.
MGM Resorts International gets a B+ grade
As another major source of spending for MGM Resorts International, Standard & Poor’s Global Ratings also mentioned a project in New York. The operator is seeking one of three casino licenses to convert its Empire City slot hall in Yonkers into a full-fledged casino.
Taking into account the license fee set at $500 million, the group estimates that it would have to spend between $2 and $2.2 billion in 2024 and 2025 to complete this project.
Standard & Poor’s Global Ratings gave MGM Resorts International a B+ rating based on these and other data.
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