MGM lays bare financial commitment to potential Osaka project

By Noah Taylor Updated
MGM Resorts reaffirms Osaka commitment despite get-out-clause

An integrated resort in Osaka would require US$2.5 billion in capital according to MGM Resorts International chief executive and president Bill Hornbuckle.

Inside Asian Gaming reports that Hornbuckle said the company would invest the sum over three years from 2024 to 2026.

The estimated figure comes after it was revealed that MGM and its consortium partner ORIX are planning to invest US$9.09 billion or 1 trillion Japanese yen on the project, which they submitted on July 20.

Breaking down MGM’s capital commitment expectations during the company’s most recent earnings call, just hours after announcing a US$4.4 billion cash injection into the company via the sale of its stake in MGM Growth Properties, Hornbuckle said he expected MGM to contribute more than $2 billion to the initial integrated resort development.

“The program with ORIX is 40-20-20, meaning a consortium with other Japanese companies will make up the 20 per cent,” he said.

“If not MGM and ORIX both fill to 50 per cent.

“If we call the project US$10 billion, although we think it will be a little lower, with 55/45 debt to equity, that means for us it’s a US$2 billion to US$2.5 billion cheque, probably split between 2024, 2025 and 2026.”

Further investment flagged by CEO

Hornbuckle said there would certainly be further investment in the future.

“There is a commitment we are making to Japan and to Osaka that we would be a true partner in this.”

It is expected that MGM will be named Osaka’s operator partner before the end of 2021, with Hornbuckle expressing obvious confidence in the company’s bid, given the absence of any competition.

“We officially submitted our request for proposal as the sole bidder for the Osaka licence a couple of weeks ago, which starts the clock on a three-month review process,” he said.

“We and our local partners remain excited by the opportunity which we expect will yield very attractive returns.

“We look forward to Osaka reviewing our proposal and we are hopeful and confident that we will be named Osaka’s designated operator in the coming months.”

MGM sole bidder but not guaranteed licence

While it’s clear MGM-Orix has the Osaka field to itself, that’s not a guarantee of ultimate success.

After the Japanese cities wanting to be homes to gaming venues select operator partners, the next step is to bring proposals to the federal government.

From there, officials will grant three gaming permits, and it’s not clear where Osaka falls in that pecking order.

The city faces credible challenges from Yokohama and Nagasaki.

Operators and local officials alike could be thrown curveballs if Tokyo decides to enter the mix.

There’s some speculation to that effect, with analysts saying the largest Japanese city could mull an integrated resort after it hosts the Summer Olympics in late 2021.

Tokyo entering the competition could lure companies that previously scrapped Japan plans back to the party.

It could also affect Yokohama more than other competing areas.

For its part, MGM has long been intent on bringing a casino-resort to Osaka and now it’s simply a matter of the city getting approval to host such a venue.

Previously, Asia-Pacific gaming behemoths Galaxy Entertainment and Genting Singapore expressed interest in the Japanese city.

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