Mohegan lenders demand immediate repayment of South Korea debt

MGE chief financial officer Ari Glazer shared the development Thursday (13 February), during a fourth-quarter earnings call.

“Just a few hours ago, we received notice from the agent for the lenders to MGE Korea Limited, the parent company of Inspire, that they have accelerated the debt,” Glazer said.

Invoking the acceleration clause could allow principal lender Bain Capital to “take certain remedies, including appropriation of the shares of MGE Korea Limited,” Glazer continued. “We’re evaluating the propriety of these actions and considering the appropriate responses.”

Early momentum slowed

The $1.7 billion (£1.3 billion/€1.6 billion) integrated resort opened in Incheon, South Korea last March. Early excitement about the IR, hailed as the “the Las Vegas of Korea,” spurred the Connecticut-based tribal operator to a record-breaking second quarter. In Q2 2024, companywide net revenue reached $504 million, up 21.4% over 2023.

MGE President and CEO Ray Pineault attributed the results to “profitable growth in digital, the ramp-up at Inspire… (and) the resilience of our flagship, Mohegan Sun.” He called them “important drivers for our growth in the present and future.”

At the time, CBRE analysts said the Incheon resort could achieve positive cash flow by early 2027.

But that momentum slowed. By the end of the 2024 fiscal year, EBITDA of $349.0 million had dropped almost $51 million, in part due to opening costs at Inspire, as well as low table hold at the IR’s foreigners-only casino. Now lenders are calling in their markers.

Glazer: Little impact outside South Korea

Last month, MGE said it offered “no assurance” that it could successfully refinance $275 million in Bain-backed loans and other obligations. That could trigger defaults that compromise MGE as a “going concern.”

In yesterday’s earnings report, MGE again acknowledged its looming debt maturities and potential financial covenant violation. “Taken together,” the report stated, they “present significant risks to investors.”

However, Glazer added, the South Korean debt crisis “does not result in a cross-default to any other Mohegan debt.

“Nevertheless, while we do not expect any material impact on our operations at any of our North American properties in the first quarter, we do need to evaluate the impact of these events on our overall financial reporting,” he said. “We will provide subsequent disclosure in due course.”

MGE still Inspired

MGE reported a $216.7 million increase in net revenue over fiscal 2023. Glazer attributed the boost to “continued growth in Mohegan Digital, and strong non-gaming revenues at our other resorts.”

Moreover, reported the New London Day, the operator said it is committed to the long-term success of Inspire. The lavish resort includes three hotel towers with 1,275 rooms, a 15,000-seat amphitheater and an indoor water park.

Pineault also put a good spin on the results. “During 2024, Mohegan rolled out a number of important initiatives as part of our strategy to become one of the premier global omnichannel resort operators,” he said. “As I look forward to 2025, I’m optimistic about the trends I see emerging within our omnichannel business and from the increased contributions by our non-gaming segments.”