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Moody's downgrades Mohegan Gaming's credit rating, issues 'negative' outlook

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Moody's Investors Service has downgraded Mohegan Gaming & Entertainment's credit rating and issued a "negative" investment outlook for the company whose flagship casino, Mohegan Sun, closed more than a week ago amid the coronavirus outbreak.

MGE, also known as the Mohegan Tribal Gaming Authority, also owns and/or operates gaming facilities across North America, all of which closed by March 17.

Moody's, the credit-rating agency, dropped MGE's "Corporate Family Rating" to B3 from B2.

In a news release, the agency said the downgrade reflects the "meaningful earnings decline" MGE is expected to experience over the next few months "from efforts to contain the coronavirus and the potential for a slow recovery once properties reopen."

"Because of approaching October 2021 maturities, the credit profile and liquidity could deteriorate meaningfully over the next three to six months if the company's operating performance does not rebound quickly from the coronavirus outbreak," the agency said.

Positive considerations include MGE's "high quality, well-established, and large amount of gaming and attractive nongaming amenities along with its earnings diversification efforts," Moody's said. MGE derives management and development fees from casinos in the United States and Canada, and has an investment in a resort casino project in South Korea, which Moody's views as a long-term positive for the company.

Moody's reported that as of Dec. 31, 2019, MGE had a considerable amount of unrestricted cash on its balance sheet and has since taken steps to preserve liquidity.

"As a result, and despite the stress on financial resources that will occur as a result of the coronavirus crisis, the company still has the ability to generate and maintain an excess level of internal cash resources after satisfying all scheduled debt service, maintenance level capital expenditures, and cash distributions to the Mohegan Tribe ...," Moody's said. "Reducing cash distributions would provide some additional cash flexibility if MTGA (MGE) and the Tribe feel it is necessary."

Moody's said gaming is one of the business sectors most significantly affected by the coronavirus outbreak, given the nonessential nature of casino gaming and the sector's sensitivity to consumer demand and sentiment.

MGE generated about $1.46 billion in net revenues in the 12-month period that ended Dec. 31, 2019, according to Moody's.

b.hallenbeck@theday.com

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