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Moody’s confirms Mohegan credit ratings

February 2, 2019

Citing Mohegan Sun’s “better than expected performance” since MGM Springfield opened, Moody’s Investors Service this week confirmed the Mohegan Tribal Gaming Authority’s credit ratings while concluding that the company remains “susceptible” to increased competition from Massachusetts.

Moody’s had announced Oct. 31 that it was placing MTGA’s ratings “on review for downgrade.”

“The important event here is the confirmation of our ratings,” Mario Kontomerkos, MTGA’s chief executive officer, said Friday. “It shows that the impact from Springfield is less than they expected.”

MTGA also is known as Mohegan Gaming & Entertainment.

Moody’s confirmed its “B2” Corporate Family Rating and “B2-PD” Probability of Default Rating for MTGA, as well as a “B1” senior secured credit facility rating and a “B3” senior unsecured note rating. Moody’s ratings scale ranges from “Aaa,” the highest-quality obligations, to “C,” the lowest rated, offering investors little prospect for recovery of principal or interest.

“The confirmation of MTGA’s ratings considers that the impact on gaming revenue and profitability from MGM Springfield, a competing facility owned by MGM Resorts that opened in August 2018, has been less than Moody’s expected at the time the review for downgrade was initiated,” Keith Foley, a senior analyst at Moody’s, said in the rating action.

MTGA’s monthly slot-machine revenues “took a hit” soon after MGM Springfield opened, Foley said, but the declines shrank considerably from October to December.

The negative rating outlook stems from the anticipated impact of the Boston-area casino Wynn Resorts is scheduled to open in June. The Wynn casino’s impact on MTGA’s revenue and earnings could hamper MTGA’s ability to manage its debt-to-earnings ratio, Moody’s concluded.

Before the ratings review, MTGA’s outlook was “stable.” 

Kontomerkos said ratings agencies typically post negative outlooks before new competition enters a market because of the uncertainty surrounding the effect of such events. He said he’s confident that Wynn Resorts’ Encore Boston Harbor casino will pose less of a threat to Mohegan Sun than MGM Springfield has.

“One of the things we’re finding is that it’s very hard to replicate the tremendous product we have here in Connecticut,” he said. “A second piece of it is that we get a substantially smaller percentage of our business from the Boston area than we do from the Springfield area.”

Massachusetts gaming regulators have been investigating their 2013 awarding of a casino license to Wynn Resorts, whose former chairman, Steve Wynn, has been accused of sexual misconduct. In Nevada, an investigation into the allegations shows that Wynn executives were aware of them, The Wall Street Journal reported this week.

Mohegan Sun competed with Wynn for the Boston-area casino license.

b.hallenbeck@theday.com

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