The capital contribution that is expected to be made by MGM Resorts International to the much-awaited casino resort project in Osaka could be worth between $2 billion and $2.5 billion.
According to S&P Global Ratings, the stake that the US gambling giant will have in the integrated casino resort project is unlikely to surpass 50%. The popular ratings agency believes that the US casino operator and its local partner Orix Corporation will probably hold a 40% stake in the project each, while the remaining 20% stake is likely to be held and controlled by local investors. The projection falls in line with a previous announcement by MGM Resorts saying that the company will not hold a majority stake in the Japan-based venue.
S&P Global Ratings shared that its projection regarding the company’s equity contributions was based on the estimated development cost of the project ($10 billion), as well as on the expectation of MGM Resorts International that the integrated casino resort project could be funded at 55% debt to equity. According to the ratings agency, the US casino giant believed its equity contribution could be spread in the course of several years, probably between 2024 and 2026.
However, this could pose a certain risk for the company because it could take several years for the company to deliver cash flow after making its initial financial contribution to the integrated casino resort in Osaka. This basically means that the company is unlikely to generate immediate profits but the Osaka project will bolster the gambling operator’s geographic footprint and could pay long-term dividends for MGM Resorts.
MGM Consortium to Develop Osaka Casino Not Yet Given Operating Permit
An investment in Japan’s casino sector could work in favor of MGM Resorts International, especially at a time when investors require operators to retain cash and deploy it in a sensible way. First and foremost, the consortium formed to pursue the Osaka integrated casino resort has not yet been awarded an operating permit but the authorities could do that by the end of 2023. This basically means that the US gambling giant is unlikely to start spending big money in Japan until late 2023 or 2024 at the earliest.
As explained by S&P Global Ratings, if the company is granted an operating license, the project will probably take a few years to complete, so the resort could open in the second half of the decade.
Apart from that, the ratings agency highlighted New York as the other jurisdiction where MGM Resorts International could be forced to spend a lot of money in the near future, as the slots-only Empire City in Yonkers could land one of the three operating permits for a downstate casino venue. As previously reported by CasinoGamesPro, the selected companies are required to pledge an investment of no less than $500 million for the gaming project, and pay a licensing fee of the same amount.
Currently, S&P Global Ratings rates MGM Resorts “B+”. The company shared expectations that the US gambling giant would maintain “healthy liquidity” of no less than $3 billion, including cash and revolver availability.