VICI Selling $5B in Bonds to Fund MGP Notes Exchange, Reduce Other Debt

VICI Properties (NYSE:VICI) announced today it’s selling $5 billion worth of senior unsecured notes.  The bulk of those proceeds are going to a notes exchange with MGM Growth Properties (NYSE:MGP), which the former is in the process of acquiring.

The Caesars Palace owner is selling $1.5 billion worth of 5.125% senior unsecured notes due 2032, $1 billion in 4.950% senior unsecured long notes due 2030, $1.25 billion aggregate principal amount of 4.750% senior unsecured long notes due 2028, $750.0 million aggregate principal amount of 5.625% senior unsecured notes due 2052, and $500 million in 4.375% senior unsecured notes due 2025.

The issuer intends to use the net proceeds from the offering to fund the approximately $4.4 billion consideration for the redemption of a majority of the VICI Properties OP LLC units to be received by MGM Resorts International in connection with the closing of the MGP acquisition,” according to a statement issued by the casino landlord.

The gaming real estate investment trust (REIT) adds that the remaining $600 million will be directed to repaying “substantially all” of that amount that it drew down on a revolving credit facility to fund its purchase of the property assets of the Venetian, the Palazzo and Venetian Expo. That transaction was completed earlier this year.

Next Step in MGP Marriage

Last August, VICI announced the $17.2 billion all-stock acquisition of MGP. That deal will create the largest casino landlord on the Las Vegas Strip.

“Interest on the 2025 Notes, the 2032 Notes, and the 2052 Notes is payable in cash in arrears on May 15 and November 15 of each year, beginning on November 15, 2022. Interest on the 2028 Notes and the 2030 Notes is payable in cash in arrears on February 15 and August 15 of each year, beginning on August 15, 2022,” adds VICI.

The REIT also said any capital remaining following the notes exchange and repayment of the credit revolver will be used for general corporate purposes, potentially including acquisitions.

VICI Credit Profile

Owing to the fact that the notes sale was announced just hours ago, credit ratings agencies haven’t yet chimed in on the transaction. On Monday, Fitch Ratings lifted its grade on VICI to “BBB-“ from “BB,” with a “positive” outlook.

“Fitch expects VICI will reduce net leverage to 5.5x within 24 months of the transaction closing from an estimated pro forma 5.7x at closing,” said the research firm. “Fitch views the merger to be strategically sound in that it alleviates some considerations that were previously restraining the two companies’ standalone credit profiles such as tenant and asset diversification.”

By way of the MGP purchase, VICI is adding 15 gaming properties to its portfolio and nearly $1.01 billion in annual rent.