Mohegan Gaming & Entertainment (MGE) informed creditors earlier this month that its Inspire Korea casino hotel is underperforming and that it has amended its credit agreement for the fourth time.
While this raised concerns about the creditworthiness of the Inspire holding company and the possibility of a loan default, the tribal casino giant emphasized that the amended credit agreement allowed it to remove the “prohibition on going concern language in our audited financial statements” and that all payment obligations have been met.
“Further, covenant violations or default under the INSPIRE holdco term loan won’t trigger defaults in other borrowing facilities of Mohegan or its subsidiaries,” said Gimme Credit analyst Kim Noland in a new report.
Inspire Resort’s Slow Growth Critical for Mohegan’s Credit Rating
Although the Inspire holding company is a separate entity from the broader Mohegan Gaming company, Noland described the ramp-up of the South Korea integrated resort as “critical” to the issuer’s overall credit health.
Noland noted that Inspire is not yet profitable, while Paradise City, a nearby rival, is making money despite being half the size of the Mohegan property.
“The company’s auditors required a going concern exception in its latest quarter report, highlighting the upcoming November 2025 maturity of the Korea Credit Facility,” Noland observes. “Our calculation of total leverage at the restricted group (the ratio of total debt at the restricted group versus adjusted EBITDA from restricted group segments) remains elevated in the high 5x range.”
Mohegan Bonds Face Pressure Amid Credit Covenant Issues
Due to the overhang from Inspire, Mohegan bonds may come under pressure, especially if the covenant violations are not fixed.
“Mohegan’s credit profile is deteriorating as a result of its inability to get a waiver and significant upcoming maturities, including the company’s major public maturity of $1.175 billion in second lien secured bonds a year from now,” concludes Noland. “We had found those bonds attractive when trading at 13%, but we rate them underperform at the current yield-to-worst of 8.3%.”
