Running casinos is a capital-intensive business, explaining why many operators carry substantial debt burdens. The good news is that many of the largest names in the industry aren’t facing significant near-term maturities.
In a recent report to clients, Deutsche Bank analyst Carlo Santarelli observed that 2024 and 2025 maturities among publicly traded gaming companies are relatively limited. Of the 12 casino companies the bank covers, just five have debt coming due this year or in 2025: Gaming and Leisure Properties, Las Vegas Sands, MGM Resorts International, VICI Properties, and Wynn Resorts.
Santarelli noted that MGM has $1.175 billion at a blended interest rate of 5.5% coming due next year. However, his report came before MGM announced it is selling $850 million worth of corporate bonds maturing in 2029 to eliminate an issue that comes due in 2025.
He added that most of the debt these five companies have coming due over the near term is at favorable interest rates, indicating the casino operators wouldn’t materially benefit from refinancing those obligations. This would remain the case even if interest rates significantly decline in the coming months.
While some of the casino operators mentioned don’t need to rush to refinance outstanding debt, there are benefits to be accrued in the industry from lower base rates. Santarelli wrote, “We do believe the next 6-12 months will likely bring some relief to those with larger variable debt mixes. As evidenced in our analysis, a reduction in base rates will have the most notable and favorable impacts on discretionary free cash flow, based on our current 2025 discretionary free cash flow forecasts.”
Boyd Gaming, Caesars Entertainment, Golden Entertainment, Light & Wonder, Penn Entertainment, Red Rock Resorts, and Wynn could all experience increases of at least 3% to discretionary free cash flow if rates fall by 150 basis points throughout 2025, according to Santarelli. At the high end of that range, Caesars would save $91.1 million in annual interest expenses if interest rates fall by 1.5%. Sands would follow with savings of $42.1 million, according to Deutsche Bank estimates. On a percentage basis of increased free cash flow assuming rates fall 150 basis points, Golden Entertainment would top at 7.3%.
Assuming no refinancing takes place over the near term, Las Vegas Sands and VICI face the largest 2025 maturities. Sands has $2.121 billion in bonds at a blended interest rate of 4.6% coming due next year, while VICI has $2.050 billion at a blended interest rate of 4.2% maturing next year, according to Deutsche Bank.
VICI’s looming maturities aren’t viewed as alarming by analysts and investors because real estate investment trusts (REITs) typically carry sizable debt burdens. In the case of the casino landlord, it recently boosted its 2024 adjusted funds from operations (AFFO) guidance. Additionally, VICI’s contracts with gaming operator tenants are long term with gradual rent increases, providing earnings visibility.
