MGM Resorts International (NYSE:MGM) Faces Decline in Gambling Business

MGM Resorts International (NYSE:MGM) has been having ups and downs with respect to its Chinese subsidiary. The company announced that its subsidiary, MGM China Holdings Ltd. had agreed to restate and amend its HK dollar senior credit facilities agreement. However, the gambling operations of the company in Macau had been subject to a crackdown by Chinese officials. The Chinese government has been taking a hard line against corrupt senior officials.

The new agreement will expand the credit facility by $1 billion and expands the maturity by 18 months. The new facilities are now worth $1.55 billion, with $1.45 billion revolving credit. The CEO of MGM China, Grant Bowie, expressed gratitude towards the lenders allowing for the new upsized credit facility. He stated that the finances would be used for corporate purposes and investments in MGM Macau and Cotai.

The news had come before China started the crackdown on corrupt officials. This has resulted in a loss of business for MGM Macau. Consequently, analysts do not believe that the gambling business would return enough revenues in the 1Q2015. In fact, it is believed that MGM is looking towards other segments of its business for compensating the losses. With at least two movies produced in the first quarter, analysts have remained unimpressed by the developments.

They have remained of the view that the gambling loss has not been compensated. However, Hot Pursuit, is still due to be released before the 1Q2015 results and will give a better idea of what to expect. The revenue from gambling in MGM Macau had been estimated to have suffered a loss of 40% in April alone. This is also an addition to successive falls in revenue in the past 11 months. However, with the many segments of business, analysts believe that MGM will still report a profit.

MGM Resorts International (NYSE:MGM) closed at $21.27 after losing 0.61% on May 4. The company has 491.31 million shares being traded in the market, with a 52-week range of $17.25-$27.64.

About the Author

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.

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