Mohegan Gaming Credit Profile Weakening, Says Analyst

Mohegan Gaming & Entertainment (MGE) told creditors earlier this month that its Inspire Korea casino hotel isn’t performing as expected and that it’s amended its credit agreement on the gaming venue for the fourth time.

While that sparked fear about the credit-worthiness of the Inspire holding company, and the possibility of a loan default, the tribal casino giant pointed out the amended credit agreement allowed it to remove “prohibition on going concern language in our audited financial statements” and that it has met all payment obligations.

Further, covenant violations or default under the INSPIRE holdco term loan wonʼt trigger defaults in other borrowing facilities of Mohegan or its subsidiaries,” said Gimme Credit analyst Kim Noland in a new report.

In simple terms, even if the Inspire holding company defaults on its loans, Mohegan’s US operations, consisting of its Connecticut and Pennsylvania casinos and an online gaming unit, won’t be affected. As a tribal gaming organization, Mohegan isn’t a publicly traded firm. But it can and does sell debt in public markets. The tribe’s gaming-related debt carries noninvestment grades from the major ratings agencies.

Inspire ‘Critical’ to Mohegan’s Credit Health

While the Inspire holding company is a separate entity from the broader Mohegan Gaming company, Noland described the South Korea integrated resort’s ramp-up as “critical” to the issuer’s overall credit health.

“The companyʼs auditors required a going concern exception in its latest quarter report, highlighting the upcoming November 2025 maturity of the Korea Credit Facility,” observes Noland. “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.”

Noland noted that Mohegan Sun rebounded in fiscal 2024 and that earnings before interest, taxes, depreciation, and amortization (EBITDA) at the operator’s digital arm rose in the fourth quarter.

Mohegan Bonds Need a Jolt

Owing to the Inspire overhang, Mohegan bonds could come under pressure, particularly if the covenant violations aren’t fixed.

Moheganʼs credit profile is deteriorating as a result of its inability to get a waiver and significant upcoming maturities, including the companyʼs major public maturity $1.175 billion of 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%.”

Yield-to-worst expresses the lowest possible yield on bonds that carry some form of prepayment risk.