MGM Resorts Sells $500M Notes; Investor Protections Questioned

NEW YORK (Dow Jones) -- Casino operator MGM Resorts International (MGM) late Monday afternoon sold $500 million of senior unsecured 6-year notes as part of an ongoing effort to refinance existing debt.

The 10% notes due November 1, 2016 sold at a discounted face value of 98.897 cents on the dollar to yield 10.25 percent via underwriters Bank of America Merrill Lynch, Barclays, BNP and RBS, according to a person familiar with the deal, in line with earlier price guidance.

Standard & Poor's on Monday rated the notes CCC+ while Fitch Ratings rated them CCC, both deep in speculative-grade, or junk, territory. Proceeds from the offering will repay part of the $1.2 billion of MGM's senior credit facility still due to mature in October 2011. In February, lenders representing $4.37 billion of the $5.55 billion senior bank credit facility agreed to extend the maturity of their portion to 2014 from 2011.

Some analysts assailed the new note offering for what they said was a lack of investor protections, known as covenants, that are commonly found in other speculative-grade bond offerings.