Fitch calls on Mohegan to exit South Korea’s INSPIRE amid debt challenges
Fitch Ratings has urged Mohegan Tribal Gaming Authority to reconsider its involvement in South Korea’s INSPIRE Casino Resort, citing financial risks tied to the project. This comes as the ratings agency assigned a ‘B’ Long-Term Issuer Default Rating (IDR) to Mohegan and its digital arm, Newco Digital Holdings, LLC, with a stable outlook.
Mohegan recently accelerated its term loan for INSPIRE following covenant breaches, leading Bain Capital and other lenders to assume control of the property. As a result, the tribal gaming operator may be required to contribute up to $100 million (€92.2 million) to meet financial obligations.
However, Fitch believes that losing control of INSPIRE could ultimately benefit Mohegan’s financial health, allowing the company to secure funding for its U.S. operations. A potential financing transaction may stabilise its debt position, with Mohegan expected to exit the Korea credit facility following the loan acceleration.
Fitch anticipates that Mohegan will prioritise debt reduction, financial restructuring, and digital gaming expansion as part of a long-term strategy to ensure stability and growth.
Strong gains for Mohegan abroad
Despite these issues, Mohegan continues to see strong revenue from Mohegan Sun and its Pennsylvania operations. Its digital gaming business, bolstered by a partnership with FanDuel, remains a key growth driver. The company’s digital segment has been expanding, providing crucial support to its financial outlook.
Additionally, Mohegan benefits from management fees and distributions from its Niagara and Korean operations, though risks remain regarding regulatory developments and regional competition.
Fitch notes that Mohegan is exposed to potential competitive threats from new gaming licences in the lower New York area and a proposed tribal gaming facility in Massachusetts. However, these developments are expected to take several years to materialise, and Mohegan’s market positioning offers some insulation from immediate disruption.
Challenges far from over
The company’s capital structure has become increasingly complex due to its expansion into markets such as South Korea, Atlantic City, Las Vegas, and digital gaming.
While Fitch maintains a stable outlook, it warns that Mohegan’s long-term financial health will hinge on its ability to manage debt obligations and sustain revenue growth through digital gaming expansion.
The secured debt of the restricted group is backed by assets including its Pennsylvania property, the new digital subsidiary, and equity interests in the Niagara gaming facilities. If Mohegan successfully executes its refinancing strategies, it could bolster its financial position and mitigate some of the risks currently associated with its debt burden.
