MGM China Holdings was recently given access to a new revolving credit facility worth $302 million; The Macau-based casino operator is planning to use this loan to fulfill its working capital needs.

Details of the loan

The operator plans to use the fund for general purposes and to fulfill its working capital needs. According to filings by the company with the Hong Kong Stock Exchange, its loan will mature on May 15, 2024. It may gain access to an increased credit facility of $503 million if it manages to fulfill certain conditions. However, there are no details on the conditions on which this increase will depend.

The existing loan will be subject to a fluctuating rate of interest each year. It will be based on the Hong Kong Interbank Offered Rate (HIBOR) and a margin of anywhere between 1.625% and 2.75%. However, the exact level of the margin will depend on the company’s leverage ratio. The company will be able to withdraw credit from this facility until one month before maturity i.e. mid-April 2024.

If 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, the revolving credit will have to be prepaid.

Impact of the pandemic

MGM China has been one of the worst-hit companies because of the pandemic. Visitor traffic in its locations has been very low and revenues have dropped significantly over the past few months. According to its statement, the first-quarter revenue for the company was less than $271.9 million. This marked 63% decrees on a year-on-year basis. Macau casinos have been closed since February to address the spread of the virus. In the month of April, revenues were down by 97%,

MGM has been bearing the brunt of this situation as its revenues fall and traffic remains low, in both the US and China. In such a situation, the casino operator’s choice to dive into a line of credit to keep things working seems logical. The company is also looking for a replacement for CEO Grant Bowie. The longtime chief executive will be stepping down from his role on May 31 but the operator is yet to name his successor.