Following South Korea loss, Mohegans refinance debt
US-Based Gaming Operator Announces Major Financial Restructuring Amidst South Korean Challenges
In a strategic move to stabilize its financial position, the Mohegan Tribal Gaming Authority, along with its subsidiary MS Digital Entertainment Holdings, disclosed the completion of a substantial refinancing package amounting to $1.2 billion. This announcement, made last Thursday, also included the establishment of an enhanced $250 million revolving credit facility. Key elements of this restructuring involve the exchange of $226 million in unsecured notes due in 2027 for secured notes maturing in 2031 and the deferment of a portion of the 2027 unsecured notes to 2029.
Additionally, the Mohegan tribe acquired $100 million of the previously mentioned 2027 unsecured notes, extending their maturity to 2032.
This comprehensive financial package was orchestrated approximately 60 days following a cash flow crisis that led to the loss of control over Inspire South Korea. This integrated resort (IR), situated near Incheon International Airport and inaugurated in March 2024, marked Mohegan’s entry into the competitive Asian gaming market.
Positioned as the “Las Vegas of South Korea,” Inspire features three five-star hotel towers, a 15,000-seat concert hall, extensive conference facilities, an indoor water park, and a foreigner-only casino. Despite its glamorous offerings, the endeavor nearly jeopardized the tribe’s financial future.
Transition of Leadership in South Korea
For fiscal 2024, Mohegan reported record revenues of $1.9 billion, but faced a net loss of $235 million. The company acknowledged an “imminent debt covenant violation” that jeopardized its operational viability, attributing this to escalated operational costs in South Korea and lower than anticipated gaming revenues at Inspire.
Facing $275 million in impending debt repayments and unable to meet its obligations, the Connecticut-based operator sought covenant adjustments to align with prevailing market practices. However, primary lender Bain Capital opted to exercise an acceleration clause, demanding immediate payment or yielding control of Inspire. On February 19, Bain enacted its rights, taking over operations of the IR on Yeongjong Island.
Despite the change in leadership, Bain reassured stakeholders that operations would remain seamless for employees and guests alike. Inspire’s President Chen Si affirmed a commitment to maintaining “business as usual,” emphasizing a confident new managerial direction.
A Fresh Start for Mohegan
With debt maturities now extended to 2029, Mohegan gains the opportunity to “reduce leverage, enhance borrowing conditions, and foster increased strategic flexibility,” according to Chief Financial Officer Ari Glazer.
Tribal Chairman James Gessner Jr. described this restructuring as a “clear demonstration of our unwavering commitment to the success of Mohegan.” He elaborated that the operator benefits from an “extended maturity runway and financial flexibility,” ultimately strengthening their alignment with investors as they reinvest capital back into the company.
This financial realignment serves as a strategic pivot for Mohegan, positioning the operator to navigate both challenges and opportunities in the evolving global gaming landscape. As the industry adapts to changing consumer preferences and economic conditions, the successful execution of this package will be pivotal in safeguarding Mohegan’s long-term interests.
