MGM Resorts stock rose 2.13 per cent to $29.69 on more than two times average volume after Bloomberg reported Blackstone might buy and lease back Bellagio and MGM Grand Las Vegas.
The two properties likely combine for adjusted EBITDAR of $870m, Carlo Santarelli of Deutsche Bank said. At an expected 2.2 times rent coverage, the deal could generate $5.6bn to $6bn in proceeds.
The combined Eldorado and Caesars company also emerges as a winner as its owned real estate value is enhanced and Blackstone could become another potential real estate partner, Santarelli added.
Chad Beynon of Macquarie thinks MGM’s motivation would be to lower debt-to-EBITDA, buy back shares and reach the company’s target of $3.50 in free cash flow per share by the end of next year. He thinks debt-to-EBITDA can be cut from 4.7 to 3.7 times and share count, now over $520m, could near $500m.
Blackstone also owns the Cosmopolitan, which sits between Bellagio and MGM’s half-owned CityCenter. At the instance of activist investors, MGM formed a committee in January to study ways it could extract value from its real estate.
Source: Fantini’s Gaming Report
