OREANDA-NEWS. Fitch Ratings feels comfortable that recovery for MGM Resorts International's (MGM) unsecured notes will remain strong pro forma for the planned REIT transaction with its new subsidiary, MGM Growth Properties (MGP). MGM will contribute nine assets to MGP and then lease them back under a triple net lease.

MGP is assuming $4 billion of MGM's debt and Fitch expects MGM to target its credit facility ($2.7 billion outstanding as of Dec. 31, 2015) due to its lack of prepayment penalties and restrictive covenants and a portion of the unsecured notes maturing in 2016 ($1.5 billion in aggregate). To fund part of the debt assumption, MGP will execute an IPO with MGM retaining approximately a 70% stake in MGP.

MGM's stake in MGP along with the 51% stake in MGM China and 50% stake in CityCenter will benefit MGM's unsecured noteholders. MGM is also retaining Bellagio and MGM Grand, two marquee assets on the Las Vegas Strip, which have meaningful collateral value. For the analysis, Fitch assumes that MGM enters into a new $1 billion senior secured credit facility for liquidity and project capex purposes. A larger facility (e.g. $3 billion) would reduce the senior notes' recovery prospects but would not threaten the notes' 'RR2' recovery rating.

Access to Fitch's excel based recovery tool is available at
www.fitchratings.com. The recovery tool can be used to change assumptions such as debt amounts and multiples used. Fitch has published an updated recovery tool for the following U.S. gaming operators:

--Caesars Entertainment Resort Properties, LLC
--Caesars Growth Properties Holdings, LLC
--Caesars Entertainment Operating Corp.
--MGM Resorts International
--Boyd Gaming Corporation
--Peninsula Gaming, LLC