VICI Properties Prices $1.75B in Bonds, Will Pay Off Near-Term Maturities

VICI Properties (NYSE: VICI), the largest owner of casino real estate on the Las Vegas Strip, today priced $1.75 billion in senior unsecured notes, proceeds of which will be used to eliminate or reduce debt coming due late this year.

The real estate investment trust (REIT) is selling $900 million worth of bonds coming due in October 2031 at 5.4% and another $850 million worth of unsecured notes maturing in October 2036 at 5.75%. Longer-dated bonds carry higher interest rates because bondholders incur more risk with the longer timeline to maturity.

VICI’s two tranches were rated BBB- by Fitch Ratings. That’s the lowest investment-grade and keeps with the landlord’s profile across the major ratings agencies.

VICI Navigating Tough Interest Rate Environment

VICI’s debt sale is arguably noteworthy for at least two reasons. First, it shows the Caesars Palace owner is committed to eliminating near-term maturities. Second, it’s doing so against a challenging interest rate backdrop.

Due to high debt levels, REITs are notoriously sensitive to interest rates, meaning they typically benefit when borrowing costs decline. However, Fed funds futures and prediction markets imply little chance the Federal Reserve will pare rates this year. Had rates come down at some point this year, VICI likely would have been able to bring the $1.75 billion in unsecured debt to market with lower interest payments.

Although the share price doesn’t reflect as much, the Venetian owner is navigating Fed uncertainty with aplomb.

“External investment activity has been measured and is consistent with the company’s financial policies, including leverage,” notes Fitch. “VICI could exceed Fitch’s 5.5x downgrade sensitivity temporarily while maintaining its ‘BBB-‌’ Issuer Default Rating (IDR) for strategic acquisitions if coupled with a credible deleveraging plan.”

Caesars Regional Relationship Still in Focus

Bondholders may well appreciate VICI’s plan to reduce or eliminate the aforementioned 2026 maturities, but they and their shareholder counterparts are likely still considering what comes of the REIT’s negotiations with Caesars Entertainment (NASDAQ: CZR) on the casino operator’s regional master lease.

That issue has been a drag on VICI shares, but neither the REIT nor the gaming company said much about related talks on their recent second-quarter earnings conference calls. VICI creditors and shareholders may be more inquisitive about the state of discussions between the two companies now that Caesars is the target of a $17.6 billion takeover by Fertitta Entertainment Inc.

VICI’s annual base rent is highly concentrated among Caesars (38%) and MGM Resorts International (32%).