Gaming Today: MGM believes it can survive shutdown

Apr 22, 2020
In The News

MGM Resorts International believes it has enough liquidity to weather the economic downturn due to the coronavirus outbreak and the resulting closure of the company’s casinos in Nevada and across the country, the company’s acting CEO said Friday. 
“While this undoubtedly have a significant negative effect on our business in the near term, we are well-positioned to emerge from the current crisis in the light of our strong liquidity position and valuable asset portfolio,” Bill Hornbuckle said in a statement. 
Since March 16, MGM temporarily closed all of its U.S. properties, including 13 on the Las Vegas Strip, in an effort to stem the coronavirus pandemic. MGM employs more than 70,000 people at 20 resorts nationwide. 
In a statement, Las Vegas-based MGM said it had approximately $3.9 billion in operating cash and cash investments is available to support the company during the closures. 
The company doesn’t have any debt obligations due until 2022. MGM is also actively reviewing all of its capital spend projects and expects to defer at least 33 percent of planned 2020 capital expenditures. 
Hornbuckle attributed its strong liquidity position to a cost savings program introduced last year. 
“With the continued execution of the MGM 2020 plan, as well as the implementation of aggressive cost savings initiatives, we believe the company will be able to manage its expenses while navigating this unprecedented event,” Hornbuckle said. 
Hornbuckle stressed the company is currently making some very difficult decisions, but “these will be in the best interest of the company long term.” 
Currently, MGM is only reporting revenue from its two resorts in Macau, which closed for 15 days in February, when China closed the region’s 41 casinos to deal with the coronavirus outbreak. 
However, MGM on Friday updated its results for January and February. The company reported consolidated net income of $1.3 billion, up significantly from the $27 million reported for the same two months last year. The company attributed its earnings to the approximately $1.5 billion pre-tax gain related to the MGM Grand, Mandalay Bay real estate transaction.  
MGM noted that is has incurred substantial operating losses in March and the company does not expect to see a material improvement until more is known regarding the duration and severity of the pandemic, including when MGM’s properties can re-open. 
MGM issued its update a few hours before President Trump signed the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, a new law that amounts to the largest emergency spending measure in U.S. history. 
“This act makes emergency supplemental appropriations and other changes to law to help the nation respond to the coronavirus outbreak,” Trump said at a bill signing ceremony Friday at the White House.  
It will provide checks to more than 150 million American households, offer loan programs to the gaming industry and dozens of other businesses and direct spending to unemployment insurance, hospitalities, municipalities and more. 
The bill includes $500 billion to provide loans, loan guarantees and other investments for the hardest-hit industries, including the gaming industry. Any company receiving a government loan would be prohibited from buying back stocks while getting assistance as well for an additional year. 
Companies that kept workers on the payroll despite significant loss of revenue could get a tax credit. They could also defer paying some social security taxes. 
In Las Vegas, Boyd Gaming, Wynn Resorts and other gaming companies who continue to pay employees during the 30-day shutdown ordered by Gov. Steve Sisolak could be eligible to apply for these benefits. The bill also provides tax payments, increasing deductibility for interest expenses and allowing expensing qualified property improvements, especially for the hospitality industry. 
“We need an enormous recovery package to bring relief to families , workers, and small businesses, and that is exactly what we have passed,” said Rep. Dina Titus, D-NV, whose district includes the Las Vegas Strip. 
“As co-chair of both the Travel and Tourism Caucus and the Gaming Caucus, I am confident that this legislation will benefit the Las Vegas Valley and help ensure that workers on the Strip have a job to return to when this crisis is over.”  
Titus noted the bill secures $1.5 billion for the Economic Development Administration that could eventually be used when it is appropriate to advertise that “communities like ours are once again open for business.” 
“Las Vegas is a resilient city. We’ve proven that before and we’ll prove it again,” Titus said. 
On Friday, the Nevada Department of Employment, Training and Rehabilitation (DETR) reported initial claims for unemployment insurance claims totaled 92,298 regular initial claims for the week ending March 21, up 85,942 claims, or 1,352 percent, to last week’s total of 6,356. 
This is the highest number of claims in Nevada history by 83,353. The previous high was 8,945 for the week ending Jan. 10, 2009, the agency said.