Mohegan Gaming faces a liquidity crunch that could threaten its future as a “going concern”. The crisis is related to its new Inspire resort in South Korea.
In its fourth-quarter and fiscal 2024 report, released New Year’s Eve, Mohegan Gaming had good news and bad news.
First, the good news. Companywide, the Uncasville, Connecticut tribal operator saw net revenue of $1.9 billion (£1.528 billion/€1.844 billion) for fiscal 2024. That’s up 13% year-on-year, and a new record.
Chief financial officer Ari Glazer attributed the upswing “primarily to continued growth in Mohegan Digital and revenue from Mohegan Inspire”. The latter, a $1.6 billion integrated resort (IR) in Incheon, South Korea, opened in March.
Last summer, Inspire helped propel Mohegan to a record quarter, with net revenue of $504 million from April through June.
Now for the bad news: earnings before interest, taxation, depreciation and amortization (EBITDA) of $349.0 million dropped almost $51 million, in part due to opening costs at Inspire, as well as low table hold at the IR’s foreigners-only casino. Though Inspire has generated net revenue of $163.3 million in 10 months, it has yet to turn a profit.
What’s more, Mohegan currently owes $3.1 billion — including an Inspire-related loan of more than $700 million that will come due this year, and another that will mature in 2027.
With little ready cash, Mohegan faces “an imminent debt covenant violation” under its $275 million Korean Term Loan facility, “presenting significant risks to investors”.
All this has the operator scrambling. It plans to “refinance the Senior Secured Credit Facility, refinance the Korea Credit Facility, and seek additional sources of liquidity to repay and/or obtain waivers or amendments under the Korea Term Loan”, according to the 31 December results.
“These plans have not been finalized, are subject to market conditions, and are not within the company’s control …,” Mohegan wrote in a press release. “As a result, management’s plans do not alleviate substantial doubt about the company’s ability to continue as a going concern”.
Analyst: South Korea a “difficult market”
In an interview yesterday (2 January), Glazer told the New London Day the debt is “a meaningful amount to refinance”.
However, he insisted, “Nothing has changed in the business. Inspire continues to ramp. The property is less than a year old. We’re pleased with the early results and we think there’s a lot of potential there that has yet to be achieved. We’re encouraged and remain optimistic.”
Fredric Gushin, president and CEO of Spectrum Gaming, was not as upbeat. He told the Connecticut newspaper, “Any casino in South Korea goes in knowing it’s facing headwinds because the locals can’t (gamble)” a prohibition that is unlikely to change in the near future.
“Ultimately”, he said, “this is a difficult market”.
