Mohegan Tribal Gaming upgraded to Caa1 after debt deal boosts liquidity

Mohegan Tribal Gaming Authority was upgraded on Jan. 29 by Moody's to Caa1 and a stable outlook, from Caa2 and ratings under review, after netting a $1.175 billion bond issuance, which the agency said had a "meaningful positive impact" on the company's liquidity. Mohegan's first-lien revolver was affirmed at B1 and its senior secured second-lien notes were affirmed at Caa1.

Moody's said that going forward there are "no material near-term maturities," while at Sept. 30, 2020, pro forma for the bond deal and other transactions there was under $100 million drawn on Mohegan's $263 million revolver — the expiration of which was extended 18 months, to April 2023. The ratings agency added that senior unsecured bonds due in 2024 and the new second-lien notes maturing in 2026 have no principal due prior to maturity, other than a springing maturity on the second-lien notes that could be triggered by the unsecured notes (and standard provisions related to asset sales and change of control).

Moody's said that the company's leverage, which it projects to be roughly 7x by fiscal-year-end 2021, "still leaves [Mohegan] with a high degree of financial risk." Moody's noted that the company's earnings are concentrated in a few properties with "high competition," while it faces operational challenges from the pandemic. The ratings agency projects a "slow recovery" to pre-pandemic volume.

The company owns and operates Mohegan Sun, a gaming and entertainment complex near Uncasville, Conn., and Mohegan Sun Pocono, which offers slot machines and harness racing in Plains Township, Pa. It also manages several non-affiliated casinos.