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Mohegan Tribal Gaming Misses Debt Payment, Moody’s Sees Elevated Default Risk

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Mohegan Tribal Gaming Misses Debt Payment, Moody’s Sees Elevated Default Risk

The research firm pared its mark on MTGA’s bonds to “Caa2” from “B3”, meaning there are just three lower grades that could be assigned to the debt. Bonds with any of the three “Caa” grades are deemed to be in poor standing and carry “very high credit risk.”

MTGA,the owner of the Mohegan Sun casinos in Connecticut and Pennsylvania, is dealing with coronvirus closures, as those two venues have been shuttered for about six weeks, straining the operator’s revenue stream in the process.

Missed Interest Payment: a Bad Sign

Earlier this month, MTGA missed a $19.7 million interest payment, and while that’s not a guarantee of imminent default, financially sturdy, highly rated companies rarely avoid debt or interest service.

“In Moody’s opinion, MTGA’s failure to make the scheduled interest payment of approximately $19.7 million due on April 15, 2020 with respect to the company’s 7.875% senior notes due 2024 reflects in part MTGA’s highly uncertain operating environment,” said the credit rater.

Experts believe Mohegan Sun and Nutmeg State rival Foxwoods can endure the current downturn, but both carry massive amounts of debt.

Important Deadline

While MTGA missed an interest payment on bonds coming due in 2024, there’s a more imminent maturity the operator has to deal with.

The firm’s speculative “ratings also reflect the negative effect on consumer income and wealth stemming from job losses and asset price declines, which will diminish discretionary resources to spend at casinos, including MTGA’s casino properties, once this crisis subsides. Additionally, because of approaching October 2021 maturities and weak earnings, MTGA’s refinancing and default risk is high,” according to Moody’s.

There are inklings that some tribal casinos across the US will soon reopen. But it’s clear the COVID-19 pandemic is punishing MTGA and leaving it vulnerable to seismic economic shifts.

“More specifically, MTGA’s continued exposure to travel disruptions and discretionary consumer spending have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, and makes it vulnerable to the outbreak continuing to spread,” said Moody’s.

 

Πηγή: www.casino.org

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