TEXT - S&P raises MGM Resorts International rating

Overview
-- Las Vegas-based gaming operator MGM Resorts launched a tender
offer to repay its existing senior secured notes and credit facilities with
proceeds from a new $4 billion senior secured credit facility and $1 billion in
unsecured notes.
-- We are raising our corporate credit rating on MGM to 'B+' from 'B-'.
-- We are assigning issue-level ratings to the company's proposed senior
secured credit facility and senior unsecured notes.
-- The stable rating outlook reflects our expectation that credit
measures will remain at a level that is in line with the rating over the next
few years, including consolidated leverage in the mid-to-high 6x area and
EBITDA coverage of interest above 2x.

Rating Action
On Dec. 6, 2012, Standard & Poor's Ratings Services raised its corporate
credit rating on MGM Resorts International to 'B+' from 'B-'. The rating
outlook is stable.

At the same time, we assigned our 'BB' issue-level and '1' recovery ratings to
MGM's proposed $4 billion senior secured credit facility. The '1' recovery
rating reflects our expectation of very high (90% to 100%) recovery for
lenders in the event of a payment default. The credit facilities will consist
of a $1.25 billion revolving credit facility, $1.25 billion term loan A, and a
$1.5 billion term loan B. The revolver and term loan A will mature in five
years and the term loan B in seven years. We also assigned our 'B+'
issue-level and '4' recovery ratings to MGM's proposed $1 billion senior
unsecured notes due 2021. The '4' recovery rating reflects our expectation of
average (30% to 50%) recovery for lenders in the event of a payment default.
Proceeds from the proposed new credit facilities and unsecured notes, together
with cash on hand, will be used to refinance the company's existing credit
facilities and to repay the company's various secured notes issuances, as well
as to pay transaction fees and expenses and for general corporate purposes.

We also upgraded all existing issue-level ratings by two notches in
conjunction with the upgrade of the corporate credit rating. We expect to
withdraw our issue-level ratings on the company's senior secured notes
issuances once the tender offer for the notes is completed and the notes are
repaid.

Rationale
The rating upgrade reflects the company's planned refinancing transaction,
which will reduce the company's interest burden given the high coupons on the
company's various secured notes issuances, thereby improving interest coverage
and cash flow generation. Although MGM's wholly owned operations will remain
highly leveraged, we expect interest coverage to improve to 1.5x or better
following these transactions, and expect the company will generate moderate
amounts of free cash flow that can be used for further debt repayment in
future periods. Additionally, the contemplated transactions, along with
transactions completed earlier this year, address a substantial amount of
MGM's debt maturities over the next 3 years, meaningfully improving the
company's maturity profile.

The rating upgrade also reflects a reassessment of our treatment of MGM China.
We had previously indicated that we could reassess our treatment of MGM China
once timeline and financing strategy for its planned Cotai development became
clearer, and if management more clearly articulated a capital structure
strategy and dividend policy. Although the timeline is still a bit uncertain
as to the start of construction for its planned $2.5 billion development in
Cotai, MGM China has formally accepted its land concession contract, which,
along with an amended and restated $2 billion credit facility, provides
clarity as to the company's financing strategy. We believe that the credit
facility, along with excess cash and cash flow generation, should be
sufficient to fund planned expenditures. Additionally, the amended and
restated credit facility also provides some flexibility for MGM China to
continue to pay dividends to shareholders, of which MGM would receive 51%,
given its ownership stake. Although the company has not articulated a formal
dividend policy, we expect it will use the flexibility in its credit agreement
to pay dividends over the next few years. We have factored in an expectation
that MGM Resorts continues to receive liquidity support from MGM China in the
form of dividends ranging from $150 million to $200 million over the next few
years, which is in line with the dividend received earlier this year.

We believe MGM China is strategically important to MGM Resorts' current
identity and future strategy. MGM China operates in the same line of business
as MGM Resorts, shares a common brand, and represents a growth vehicle for
further international developments, a key focus of the company. Additionally,
MGM Resorts maintains a controlling ownership position, and consolidates MGM
China within its financial statements. MGM China also represented
approximately one-third of MGM Resorts' consolidated property level EBITDA in
the 12 months ended Sept. 30, 2012, which, in our view, is meaningful. Thus,
despite the distinct financing structures at MGM Resorts and MGM China, we
will consider the consolidated entity when assessing MGM's credit quality
going forward. We deem the strategic relationship between the parent and
subsidiary as an important factor that has a bearing on the credit quality of
the overall consolidated entity. Consolidated credit measures, including MGM
China, are aligned with the 'B+' rating based on our business risk assessment
of the company, including our expectation that leverage will track below 7x
and EBITDA coverage of interest above 2x by the end of 2013.

Our ratings incorporate our expectation that MGM Resorts' wholly owned revenue
will grow in the low single digit percentage area and EBITDA in the
mid-to-high single digit percentage area in 2013. This forecast is primarily
driven by our expectations for performance on the Las Vegas Strip in 2013. In
2013, we expect gaming revenue on the Las Vegas Strip to grow in the low
single digit percentage area and for RevPAR to increase in the low-to-mid
single digit percentage area, driven largely by modest increases in customer
spending and visitation, anticipated strength in group booking levels, stable
supply, and continued strong hotel occupancy. We also expect Las Vegas Strip
operators to benefit from improving room rates, particularly as a result of
recent room remodels. For MGM China, we expect low-to-mid single digit growth
in both revenue and EBITDA in 2013. Our performance expectations incorporate
our view that gaming revenue in Macau in 2013 will grow 5% to 10%, aligned
with our economists' expectations for GDP growth in China, as well as our
expectation that MGM will continue ramping up performance at the Macau
property.

Our corporate credit rating on MGM reflects our assessment of the company's
financial risk profile as "highly leveraged" and its business risk profile as
"satisfactory," according to our criteria.

Our assessment of MGM's financial risk profile as highly leveraged reflects
its high debt leverage despite the proposed refinancing transactions and
wholly owned EBITDA coverage of interest that we expect to be at least 1.5x
pro forma for the announced transactions. We expect consolidated leverage
(including MGM China) to be in the mid-to-high 6x area over the next two
years. (Excluding China, we expect leverage to be over 9x over that same time
period.) These factors are partially offset by our expectation that the
company will generate a moderate amount of free cash flow, its improved
maturity profile following the completion of the contemplated transactions,
and an expectation that the company will maintain access to capital markets
such that it will be able to address a step up in maturities to about $2.3
billion in 2015.

Our assessment of MGM's business risk profile as satisfactory reflects its
leading presence on the Las Vegas Strip, strong brand identity, and an
experienced management team; somewhat offset by its limited geographic
diversity outside of Las Vegas and a concentration of cash flows in that
market.

Liquidity
Based on likely sources and uses of cash over the next 12 to 18 months, MGM
has an "adequate" liquidity profile, according to our criteria. Relevant
elements of its liquidity profile include:
-- We expect sources of liquidity to exceed uses by at least 1.2x.
-- Net sources of liquidity would remain positive, even with a 15%
shortfall in EBITDA relative our current performance expectations.
-- We believe, as evidenced by recent and current capital markets
transactions, that the company has a sound relationship with its banks and a
satisfactory standing in credit markets.
-- While the covenant package for the new secured credit facility has not
yet been set, we expect it will include a minimum EBITDA covenant and that
levels of the covenant will be set with sufficient cushion to withstand an
EBITDA shortfall of 15% relative to our current performance expectations.

As of Sept. 30, 2012, MGM had about $2.4 billion of cash on its balance sheet,
including $936 million in cash held at MGM China. (We expect the company will
use a significant amount of this excess cash as part of this refinancing
transaction.) Pro forma for the proposed transactions, MGM will have a new
$1.25 billion revolving credit facility, of which we expect about $1 billion
to be available(based on our estimate of how much will be drawn at close). The
expected sale of its 50% ownership in Borgata Hotel Casino & Spa and related
land in Atlantic City is an additional potential source of liquidity for MGM,
and we have factored in a cash inflow of roughly $175 million in 2014. This
inflow includes about $150 million of cash held in trust that will be released
to MGM Resorts upon a sale of the asset. Additionally, we have factored in
annual dividends to MGM Resorts from MGM China in the range of $150 million to
$200 million over the next few years.

In the first nine months of 2012, MGM (excluding MGM China) generated $202
million in cash from operating activities, which was insufficient to fund
around $266 million of capital expenditures. MGM expects to spend about $365
million on capital expenditures this year, including spending associated with
room remodels at Bellagio and MGM Grand. We expect similar levels of capital
spending in 2013 and have factored in a range of $350 million to $400 million
in capital expenditures at wholly owned domestic resorts. Under our forecast,
we expect the company will generate moderate levels of free cash flow that
could be used to repay outstanding debt.

Pro forma for this transaction, debt maturities are manageable over the next
few years, as the transactions meaningfully improve the company's maturity
profile. We expect near-term maturities in 2013 and 2014 will be met through a
combination of cash on hand, free cash flow, including dividends from MGM
China and proceeds from the Borgata), along with additional debt refinancing
transactions. Maturities step up to $2.3 billion in 2015 (which include the
$1.45 billion of convertible notes and a $875 million senior unsecured note).

Outlook
The stable rating outlook reflects our expectation that credit measures will
remain at a level that is in line with the 'B+' rating over the next few
years, including consolidated adjusted leverage in the mid-to-high 6x area and
EBITDA coverage of interest above 2x. Our rating factors in an expectation
that wholly owned EBITDA will grow in the mid-to-high single digit percentage
area and Macau EBITDA will grow in the low-to-mid single digit percentage area
in 2013. We also expect MGM Resorts will generate a moderate amount of free
cash flow that could be used to repay debt at the U.S. entity, and that it
will continue to be able to access capital markets in order to address
intermediate-term debt maturities, specifically the step-up in maturities in
2015.

We are unlikely to consider a higher rating over the intermediate term, given
our expectation that consolidated leverage will remain above 6x over the next
few years. Additionally, the company's pipeline of potential development
projects limits further upside until the success of the company's bids and the
structure and financing strategy for the projects becomes clear. We could
consider a lower rating if performance trends in Las Vegas and/or Macau fail
to meet our expectations, either a result of a softening global or
market-specific economic environment in either of those markets and/or
increasing levels of competition. Additionally, we could consider lower
ratings if the company is successful in its pursuit of development projects
and the financing strategy for those projects is not aligned with our
expectations at the current rating level.

Related Criteria And Research
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
-- Parent/Subsidiary Links; General Principles, Oct. 28, 2004

Ratings List
Upgraded
To From
MGM Resorts International
Corporate Credit Rating B+/Stable/-- B-/Positive/--
Senior Secured BB B+
Recovery Rating 1 1
Senior Secured B+ B-
Recovery Rating 3 3
Senior Unsecured B+ B-
Recovery Rating 4 4

MGM Grand Detroit LLC
Senior Secured B+ B-
Recovery Rating 3 3

Mandalay Resort Group
Senior Unsecured B+ B-
Recovery Rating 4 4
Subordinated B- CCC
Recovery Rating 6 6

New Rating

MGM Resorts International
Senior Secured
$1.5B term loan B bank loan due 2019 BB
Recovery Rating 1
$1.25B revolver due 2017 BB
Recovery Rating 1
$1.25B term loan A due 2017 BB
Recovery Rating 1
Senior Unsecured
$1B sr nts due 2021 B+
Recovery Rating 4