Fitch Ratings-New York-25 January 2016: Gaming issuers' have generally good liquidity that address most near-term maturity needs, according to Fitch Ratings. We do not anticipate any major liquidity-driven defaults in the near term despite the weakened state of the US high-yield market. Issuers with the biggest development pipelines, notably Wynn Resorts (WYNN) and MGM International (MGM), have pre-funded their needs. Financially weaker issuers with intermediate maturities, notably Mohegan Tribal Gaming Authority (MTGA) and Scientific Games (SGMS), will address maturities per Fitch's base case forecasts. Fitch believes that Wynn has ample liquidity. As of Sept. 30, 2015, Wynn had $2.8 billion of liquidity, not including $875 million of yet drawn delay draw-term loans for its Wynn Everett project and $250 million of available-for-sale securities. This liquidity plus approximately $600 million of discretionary run-rate annual FCF is enough to address Wynn's $6 billion development pipeline. Wynn has no near-term maturities and its only current financial covenant is for the Macau credit facility, which excludes the debt at Wynn Resorts Ltd, the Hong Kong-listed parent of the Macau subsidiary. Macau's covenant is 5.5x in 2016 and will step down to 5.25x in 2017 relative to Fitch's forecast of 4.2x and 3.6x, respectively. Wynn's facility allows for equity cures. As of January 2016, Fitch estimates MGM's development capex commitments through 2018 at $3.2 billion. During this period, the company has $2.2 billion in maturities, excluding the senior secured debt, leaving MGM with about $5.4 billion in funding needs. Macau's needs are fully funded with a $1.45 billion undrawn revolver. Assuming MGM's US revolver gets extended, US needs can be met with $2 billion of available liquidity and $600 million-$900 million per year of domestic FCF, including CityCenter and Borgata JV distributions, as well as $150 million-$350 million in dividends from MGM Macau to MGM per year. MGM's liquidity could become a moot point if the company moves forward with its plan to contribute its assets to MGM Growth Partners. Under those circumstances, we believe MGM will repay its 2016 maturities and amend its credit facility. SGMS's 2018 and 2020 subordinated note maturities could be problematic given the distressed level at which its bonds are trading. However, SGMS has $534 million in liquidity with no maturities prior to when these notes come due, and we believe the company should generate positive FCF in 2016 (we estimate $150 million). With respect to the $250 million 2018 maturity, Fitch forecasts that SGMS will have adequate availability on its revolver ($432 million) to address this issue. The revolver matures a month after the 2018 subordinated note, and there should be enough cushion in SGMS's financial covenant to make the draw. MTGA has a sizable $780 million maturity in calendar year 2019. In the interim, aggregate maturities of approximately $300 million over the next three years could be funded between $76 million available under its revolver and estimated cumulative FCF of over $340 million. The interim maturities include an $82 million term loan A balloon payment in November 2018. The 2019 maturity wall mainly consists of term loan B and is subject to certain extension conditions being met, mainly the refinancing of the 11% subordinated notes. The 2019 maturity will coincide with two to three competitive facilities opening in Massachusetts. Fitch conservatively estimates that leverage through MTGA's secured debt will be manageable, around 3.5x, at the point of the term loan maturity pro forma for competitive openings. Leverage could be slightly lower when including potential distributions and fees related to the Cowlitz Tribe's casino project, which MTGA is helping to develop.
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