R
ISK FACTORS
Before you decide to invest in the notes, you should be aware that investment in the notes carries various risks, including those described
below, that could have a material adverse effect on our business, financial position, results of operations and cash flows. We urge you to carefully consider these risk factors, together with all of the other information included and incorporated by
reference in this prospectus supplement and the accompanying base prospectus, before you decide to invest in the notes. In addition, we identify other factors that could affect our business in our
Form 10-K
for the year ended December 31, 2017 and
Form 10-Q
for the quarter ended March 31, 2018, each incorporated by reference herein.
Risks Relating to Our Substantial Indebtedness
Our substantial indebtedness and significant financial commitments, including the fixed component of our rent payments to MGP, could adversely affect our
operations and financial results and impact our ability to satisfy our obligations.
As of March 31, 2018, we had approximately
$13.4 billion principal amount of indebtedness outstanding, including $889 million of borrowings outstanding and $581 million of available borrowing capacity under our senior credit facility, and $2.2 billion and
$2.1 billion of debt outstanding under the MGM China and the Operating Partnership credit facilities, respectively. In addition, the Operating Partnership has $1.9 billion of senior notes outstanding. Any increase in the interest rates
applicable to our existing or future borrowings would increase the cost of our indebtedness and reduce the cash flow available to fund our other liquidity needs. We do not guarantee MGM Chinas or the Operating Partnerships obligations
under their respective debt agreements and, to the extent MGM China or the Operating Partnership were to cease to produce cash flow sufficient to service their indebtedness, our ability to make additional investments into such entities is limited by
the covenants in our existing senior secured credit facility. See Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2017 and our Quarterly Report on
Form 10-Q
for the period ended March 31, 2018, each incorporated by reference herein, for a discussion of our liquidity
and financial position. In addition, our substantial indebtedness and significant financial commitments could have important negative consequences on us, including:
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increasing our exposure to general adverse economic and industry conditions;
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limiting our flexibility to plan for, or react to, changes in our business and industry;
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limiting our ability to borrow additional funds for working capital requirements, capital expenditures, debt service requirements, execution of our business strategy or other general operating requirements;
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making it more difficult for us to make payments on our indebtedness; or
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placing us at a competitive disadvantage compared to less-leveraged competitors.
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Moreover,
our businesses are capital intensive. For our owned, leased and managed resorts to remain attractive and competitive, we must periodically invest significant capital to keep the properties well-maintained, modernized and refurbished (and, under the
master lease we are required to spend an aggregate amount of at least 1% of actual adjusted net revenues from the properties subject to the master lease on capital expenditures at those properties). Such investments require an ongoing supply of
cash and, to the extent that we cannot fund expenditures from cash generated by operations, funds must be borrowed or otherwise obtained. Similarly, development projects, including our development project in Massachusetts, and acquisitions could
require significant capital commitments, the incurrence of additional debt, guarantees of third-party debt, or the incurrence of contingent liabilities, any or all of which could have an adverse effect on our business, financial condition and
results of operations.
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Current and future economic, capital and credit market conditions could adversely affect our ability to
service or refinance our indebtedness and to make planned expenditures.
Our ability to make payments on, and to refinance, our
indebtedness and to fund planned or committed capital expenditures and investments depends on our ability to generate cash flow in the future, receive distributions from our unconsolidated affiliates or subsidiaries, including CityCenter, MGM China
and the Operating Partnership, borrow under our senior secured credit facility or incur new indebtedness. If regional and national economic conditions deteriorate we could experience decreased revenues from our operations attributable to decreases
in consumer spending levels and could fail to generate sufficient cash to fund our liquidity needs or fail to satisfy the financial and other restrictive covenants in our debt instruments. We cannot assure you that our business will generate
sufficient cash flow from operations or continue to receive distributions from our unconsolidated affiliates or subsidiaries, including CityCenter, MGM China and the Operating Partnership. We cannot assure you that future borrowings will be
available to us under our senior secured credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We cannot assure you that we will be able to access the capital markets in the future to
borrow additional indebtedness on terms that are favorable to us.
We have a significant amount of indebtedness maturing in 2019, and
thereafter. Our ability to timely refinance and replace our indebtedness in the future will depend upon the economic and credit market conditions discussed above. If we are unable to refinance our indebtedness on a timely basis, we might be forced
to seek alternate forms of financing, dispose of certain assets or minimize capital expenditures and other investments. There is no assurance that any of these alternatives would be available to us, if at all, on satisfactory terms, on terms that
would not be disadvantageous to note holders, or on terms that would not require us to breach the terms and conditions of our existing or future debt agreements.
The agreements governing our senior secured credit facility and other senior indebtedness contain restrictions and limitations that could significantly
affect our ability to operate our business, as well as significantly affect our liquidity, and therefore could adversely affect our results of operations.
Covenants governing our senior secured credit facility and certain of our debt securities restrict, among other things, our ability to:
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pay dividends or distributions, repurchase or issue equity, prepay certain debt or make certain investments;
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sell assets or consolidate with another company or sell all or substantially all of our assets;
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enter into transactions with affiliates;
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allow certain subsidiaries to transfer assets; and
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enter into sale and lease-back transactions.
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Our ability to comply with these provisions may
be affected by events beyond our control. The breach of any such covenants or obligations not otherwise waived or cured could result in a default under the applicable debt obligations and could trigger acceleration of those obligations, which in
turn could trigger cross-defaults under other agreements governing our long-term indebtedness. In addition, our senior secured credit facility requires us to satisfy certain financial covenants, including a maximum total net leverage ratio, a
maximum first lien net leverage ratio and a minimum interest coverage ratio. Any default under our senior secured credit facility or the indentures governing our other debt could adversely affect our growth, our financial condition, our results of
operations and our ability to make payments on our debt.
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In addition, MGM Grand Paradise and MGM China are
co-borrowers
under an amended and restated credit facility and the Operating Partnership is a borrower under its senior secured credit facility, all of which contain covenants that restrict the respective
borrowers ability to engage in certain transactions. In particular, these credit agreements require MGM China and the Operating Partnership to satisfy certain financial covenants and impose certain operating and financial restrictions on them
and their respective subsidiaries (including, with respect to MGM China, MGM Grand Paradise). These restrictions include, among other things, limitations on their ability to pay dividends or distributions to us, incur additional debt, make
investments or engage in other businesses, merge or consolidate with other companies, or transfer or sell assets.
We are required to pay a significant
portion of our cash flows as fixed and percentage rent under the master lease, which could adversely affect our ability to fund our operations and growth, service our indebtedness and limit our ability to react to competitive and economic changes.
For the third lease year commencing April 1, 2018, we will be required to make annual rent payments of approximately
$770 million under the master lease. The master lease also provides for fixed annual escalators of 2% on the base rent in the second through sixth years and the possibility for additional 2% increases thereafter subject to the tenant meeting an
adjusted net revenue to rent ratio, as well as potential increases in percentage rent in year six and every five years thereafter based on a percentage of average actual annual net revenue during the preceding five year period. As a result, our
ability to fund our own operations, raise capital, make acquisitions, make investments, service our debt and otherwise respond to competitive and economic changes may be adversely affected. For example, our obligations under the master lease may:
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make it more difficult for us to satisfy our obligations with respect to our indebtedness and to obtain additional indebtedness;
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increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;
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require us to dedicate a substantial portion of our cash flow from operations to making rent payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, development
projects and other general corporate purposes;
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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
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restrict our ability to make acquisitions, divestitures and engage in other significant transactions; and
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cause us to lose our rights with respect to all of the properties leased under the master lease if we fail to pay rent or other amounts or otherwise default on the master lease, given that all of the properties we lease
from MGP under the master lease are effectively cross collateralized as a result of the master lease being a single unitary lease.
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Any of the above factors could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to the Notes
The notes
and the guarantees will be unsecured and effectively subordinated to our and the guarantors current and future secured indebtedness and indebtedness of our
non-guarantor
subsidiaries.
The notes and the guarantees will be general unsecured obligations ranking effectively junior in right of payment to all of our current and
future secured indebtedness and that of the guarantors. The notes and guarantees will also be effectively subordinated as to MGM Chinas and MGM Grand Paradises indebtedness in respect of their assets and revenues. As of March 31,
2018, on an as adjusted basis after giving effect to the notes
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offered hereby, we would have had approximately $13.9 billion principal amount of indebtedness outstanding, including approximately $889 million of borrowings outstanding and
$581 million of available borrowing capacity under our senior secured credit facility. All indebtedness under our senior secured credit facility is secured and would rank effectively senior to the notes offered hereby to the extent of the value
of the collateral. Additionally, the indenture governing the notes will permit us and the guarantors to incur secured indebtedness in the future. In addition, the notes and the guarantees will be structurally subordinated to all indebtedness and
other liabilities and preferred stock of our subsidiaries that do not guarantee the notes. In the event that we or a guarantor is declared bankrupt, becomes insolvent or is liquidated or reorganized, any secured indebtedness that is effectively
senior to the notes and the guarantees will be entitled to be paid in full from our assets or the assets of the guarantor, as applicable, securing such indebtedness before any payment may be made with respect to the notes or the affected guarantees.
Holders of the notes will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as the notes, and potentially with all of our other general creditors, based upon the respective amounts owed to each
holder or creditor, in our remaining assets.
The notes are structurally subordinated to all current and future liabilities, including
trade payables, of our subsidiaries that do not guarantee the notes, including, among others, MGM China, MGM National Harbor, Blue Tarp, MGM Detroit, MGP and each of their respective subsidiaries and the claims of creditors of those subsidiaries,
including trade creditors, have priority as to the assets and cash flows of those subsidiaries. In the event of a bankruptcy, liquidation, dissolution or similar proceeding of any of the
non-guarantor
subsidiaries, holders of their liabilities, including their trade creditors, will generally be entitled to payment on their claims from assets of those subsidiaries before any assets are made available for distribution to us or our guarantor
subsidiaries. As of March 31, 2018, the
non-guarantor
subsidiaries had approximately $6.1 billion aggregate principal amount of indebtedness, excluding intercompany indebtedness.
Fraudulent conveyance statutes allow courts, under specific circumstances, to avoid subsidiary guarantees.
Various fraudulent conveyance and similar laws have been enacted for the protection of creditors and may be utilized by courts to avoid or
limit the guarantees of the notes by our subsidiaries. The requirements for establishing a fraudulent conveyance vary depending on the law of the jurisdiction that is being applied. Generally, if in a bankruptcy, reorganization or other judicial
proceeding a court were to find that the guarantor received less than reasonably equivalent value or fair consideration for incurring indebtedness evidenced by guarantees, and
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was insolvent at the time of the incurrence of such indebtedness;
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was rendered insolvent by reason of incurring such indebtedness;
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was at such time engaged or about to engage in a business or transaction for which its assets constituted unreasonably small capital; or
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intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured;
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such court could, with respect to the guarantor, declare void in whole or in part the obligations of such guarantor under the guarantees, as
well as any liens granted by a guarantor securing its guarantee or the guaranteed obligations. Any payment by such guarantor pursuant to its guarantee could also be required to be returned to it, or to a fund for the benefit of its creditors.
Generally, an entity will be considered insolvent if the sum of its debts is greater than the fair saleable value of all of its property at a fair valuation or if the present fair saleable value of its assets is less than the amount that will be
required to pay its probable liability on its existing debts, as they become absolute and mature.
MGM Resorts International has no
operations of its own and we derive all of our revenue from our subsidiaries. If a guarantee of the notes by a subsidiary were avoided as a fraudulent transfer, holders of other
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indebtedness of, and trade creditors of, that subsidiary would generally be entitled to payment of their claims from the assets of the subsidiary before such assets could be made available for
distribution to us to satisfy our own obligations such as the notes.
The obligations of each subsidiary guarantor under its subsidiary
guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. This may not be effective to protect the subsidiary guarantee from being voided under fraudulent transfer law, or may eliminate the subsidiary
guarantors obligations or reduce such obligations to an amount that effectively makes the subsidiary guarantee worthless. For instance, in a Florida bankruptcy case, a similar provision was found to be ineffective to protect the guarantees.
We may require you to dispose of your notes or redeem your notes if any gaming authority finds you unsuitable to hold them.
We may require you to dispose of your notes or redeem your notes if any gaming authority finds you unsuitable to hold them or in order to
otherwise comply with any gaming laws to which we or any of our subsidiaries are or may become subject, as more fully described in Regulation and Licensing and Description of NotesMandatory Disposition Pursuant to Gaming
Laws.
Until we receive the necessary approvals from the Illinois Gaming Board and the New Jersey Division of Gaming Enforcement, as applicable,
Elgin Sub, MDDC and any other subsidiary guarantors subject to the oversight of the Illinois Gaming Board or the New Jersey Division of Gaming Enforcement, or for whom the issuance of a subsidiary guarantee is conditioned on approvals to be issued
by such authorities, will not be able to guarantee the notes.
Pursuant to the applicable gaming laws in Illinois, Elgin Sub, our
subsidiary that owns a 50% joint venture interest in the riverboat, Grand Victoria (and any other subsidiary guarantors subject to the oversight of the Illinois Gaming Board) will not be permitted to guarantee the notes without the prior
approval of the Illinois Gaming Board (the Illinois Gaming Approval). Similarly, pursuant to the applicable gaming laws in New Jersey, MDDC (and any other subsidiary guarantors subject to the oversight of the New Jersey Division of
Gaming Enforcement) will not be permitted to guarantee the notes without the prior approval of the New Jersey Division of Gaming Enforcement (the New Jersey Gaming Approval). See Regulation and Licensing. In addition, MDDHC,
the parent holding company of MDDC, will not guarantee the notes until MDDC receives the New Jersey Gaming Approval. Further, subsidiaries that we form or acquire in the future may similarly be subject to the jurisdiction of a gaming authority that
requires approval prior to the execution and delivery of a guarantee. Although Elgin Sub, MDDC, and MDDHC currently guarantee certain of our other senior debt, we cannot assure you that the Illinois Gaming Board or the New Jersey Division of Gaming
Enforcement, as applicable, will grant us the approval necessary to cause Elgin Sub and MDDC (and therefore MDDHC) to guarantee the notes, or that any future subsidiary that would require similar approvals from the Illinois Gaming Board, the New
Jersey Division of Gaming Enforcement or any other relevant gaming authority would be granted such approvals. Until we receive such approvals, which we may not receive, the notes will be effectively subordinated to certain of our other senior debt
with respect to the assets of Elgin Sub, MDDC, MDDHC or such future subsidiary.
Active trading markets for the notes may not develop.
The notes constitute new issues of securities, for which there is no existing market. We do not intend to apply for listing of the notes on any
securities exchange. We cannot assure you trading markets for the notes will develop, or of the ability of holders of the notes to sell their notes or of the prices at which holders may be able to sell their notes. The underwriters have advised us
that they currently intend to make a market in the notes. However, the underwriters are not obligated to do so, and any market-making with respect to the notes may be discontinued at any time without notice. If no active trading markets develop, you
may be unable to resell the notes at any price or at their fair market value.
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If trading markets do develop, changes in our ratings or the financial markets could adversely affect the
market prices of the notes.
The market prices of the notes will depend on many factors, including, among others, the following:
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ratings on our debt securities assigned by rating agencies;
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the prevailing interest rates being paid by other companies similar to us;
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our results of operations, financial condition and prospects; and
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the condition of the financial markets.
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The condition of the financial markets and prevailing
interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the notes.
Rating agencies continually review the ratings that they have assigned to companies and debt securities. Negative changes in the ratings
assigned to us or our debt securities could have an adverse effect on the market prices of the notes.
Risks Related to our Business
We face significant competition with respect to destination travel locations generally and with respect to our peers in the industries in which we
compete, and failure to compete effectively could materially adversely affect our business, financial condition, results of operations and cash flow.
The hotel, resort and casino industries are highly competitive. We do not believe that our competition is limited to a particular geographic
area, and hotel, resort and gaming operations in other states or countries could attract our customers. To the extent that new casinos enter our markets or hotel room capacity is expanded by others in major destination locations, competition will
increase. Major competitors, including potential new entrants, may also expand their hotel room capacity, expand their range of amenities, improve their level of service, or construct new resorts in Las Vegas, Macau or in the domestic regional
markets in which we operate, all of which could attract our customers. Also, the growth of gaming in areas outside Las Vegas, including California, has increased the competition faced by our operations in Las Vegas and elsewhere.
In addition, competition could increase if changes in gaming restrictions in the United States and elsewhere result in the addition of new
gaming establishments located closer to our customers than our casinos. For example, while our Macau operations compete to some extent with casinos located elsewhere in or near Asia, certain countries in the region have legalized casino gaming
(including Japan) and others (such as Taiwan and Thailand) may legalize casino gaming (or online gaming) in the future (including, for example, a recent proposal by China to allow gambling on Hainan Island). Furthermore, currently MGM Grand Paradise
holds one of only six gaming concessions authorized by the Macau government to operate casinos in Macau. If the Macau government were to allow additional competitors to operate in Macau through the grant of additional concessions or if current
concessionaires and subconcessionaires open additional facilities, we would face increased competition.
Most jurisdictions where casino
gaming is currently permitted place numerical and/or geographical limitations on the issuance of new gaming licenses. Although a number of jurisdictions in the United States and foreign countries are considering legalizing or expanding casino
gaming, in some cases new gaming operations may be restricted to specific locations and we expect that there will be intense competition for any attractive new opportunities (which may include acquisitions of existing properties) that do arise.
Furthermore, certain jurisdictions, including Nevada and New Jersey, have also legalized forms of online gaming and other jurisdictions, including Illinois, have legalized video gaming terminals. The expansion of online gaming and other types of
gaming in these and other jurisdictions may further compete with our operations by reducing customer visitation and spend in our casino resorts.
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In addition to competition with other hotels, resorts and casinos, we compete with destination
travel locations outside of the markets in which we operate. Our failure to compete successfully in our various markets and to continue to attract customers could adversely affect our business, financial condition, results of operations and cash
flow.
Our businesses are subject to extensive regulation and the cost of compliance or failure to comply with such regulations may adversely affect
our business and results of operations.
Our ownership and operation of gaming facilities is subject to extensive regulation by the
countries, states and provinces in which we operate. These laws, regulations and ordinances vary from jurisdiction to jurisdiction, but generally concern the responsibility, financial stability and character of the owners and managers of gaming
operations as well as persons financially interested or involved in gaming operations. As such, our gaming regulators can require us to disassociate ourselves from suppliers or business partners found unsuitable by the regulators or, alternatively,
cease operations in that jurisdiction. In addition, unsuitable activity on our part or on the part of our domestic or foreign unconsolidated affiliates or subsidiaries in any jurisdiction could have a negative effect on our ability to continue
operating in other jurisdictions. The regulatory environment in any particular jurisdiction may change in the future and any such change could have a material adverse effect on our results of operations. In addition, we are subject to various gaming
taxes, which are subject to possible increase at any time by various federal, state, local and foreign legislatures and officials. Increases in gaming taxation could also adversely affect our results. For a summary of gaming and other regulations
that affect our business, see Regulation and Licensing and Exhibit 99.2 to our Annual Report on
Form 10-K
for the year ended December 31, 2017, incorporated by reference herein.
Further, our directors, officers, key employees and investors in our properties must meet approval standards of certain state and foreign
regulatory authorities. If state regulatory authorities were to find such a person or investor unsuitable, we would be required to sever our relationship with that person or the investor may be required to dispose of his, her or its interest in the
property. State regulatory agencies may conduct investigations into the conduct or associations of our directors, officers, key employees or investors to ensure compliance with applicable standards. Certain public and private issuances of securities
and other transactions also require the approval of certain regulatory authorities.
In Macau, current laws and regulations concerning
gaming and gaming concessions are, for the most part, fairly recent and there is little precedent on the interpretation of these laws and regulations. These laws and regulations are complex, and a court or administrative or regulatory body may in
the future render an interpretation of these laws and regulations, or issue new or modified regulations, that differ from MGM Chinas interpretation, which could have a material adverse effect on its business, financial condition and results of
operations. In addition, MGM Chinas activities in Macau are subject to administrative review and approval by various government agencies. We cannot assure you that MGM China will be able to obtain all necessary approvals, and any such failure
to do so may materially affect its long-term business strategy and operations. Macau laws permit redress to the courts with respect to administrative actions; however, to date such redress is largely untested in relation to gaming issues.
In addition to gaming regulations, we are also subject to various federal, state, local and foreign laws and regulations affecting businesses
in general. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, smoking, employees, currency transactions, taxation, zoning and building codes, and marketing
and advertising. For instance, we are subject to certain federal, state and local environmental laws, regulations and ordinances, including the Clean Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act and the Oil Pollution Act of 1990. Under various federal, state and local environmental laws and regulations, an owner or operator of real property may be held liable for the costs of
removal or remediation of certain hazardous or toxic substances or wastes located on its property, regardless of whether or not the present owner or operator knows of, or is responsible for, the presence of such substances or
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wastes. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. For example, Illinois has enacted a ban on smoking
in nearly all public places, including bars, restaurants, work places, schools and casinos. Similarly, in October 2014, casinos in Macau, including MGM China, implemented a smoking ban which prohibits smoking on all mass market gaming floors
and, in 2015, the Macau Health Bureau announced that they will promote the submission of a bill proposing a full smoking ban in casinos, including in VIP rooms. The likelihood or outcome of similar legislation in other jurisdictions and
referendums in the future cannot be predicted, though any smoking ban would be expected to negatively impact our financial performance.
We also deal with significant amounts of cash in our operations and are subject to recordkeeping and reporting obligations as required by
various anti-money laundering laws and regulations. For instance, we are subject to regulation under the Currency and Foreign Transactions Reporting Act of 1970, commonly known as the Bank Secrecy Act, which, among other things,
requires us to report to the Internal Revenue Service (IRS) any currency transactions in excess of $10,000 that occur within
a 24-hour
gaming day, including identification of the
individual(s) involved in the currency transaction. We are also required to report certain suspicious activity where we know, suspect or have reason to suspect transactions, among other things, involve funds from illegal activity or are intended to
evade federal regulations or avoid reporting requirements or have no business or lawful purpose. In addition, under the Bank Secrecy Act we are subject to various other rules and regulations involving reporting, recordkeeping and retention. Our
compliance with the Bank Secrecy Act is subject to periodic examinations by the IRS. Any such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Any violations of the
anti-money laundering laws, including the Bank Secrecy Act, or regulations by any of our properties could have an adverse effect on our financial condition, results of operations or cash flows.
Our business is affected by economic and market conditions in the jurisdictions in which we operate and in the locations in which our customers reside.
Our business is particularly sensitive to reductions in discretionary consumer spending and corporate spending on conventions, trade
shows and business development. Economic contraction, economic uncertainty or the perception by our customers of weak or weakening economic conditions may cause a decline in demand for hotels, casino resorts, trade shows and conventions, and for the
type of luxury amenities we offer. In addition, changes in discretionary consumer spending or consumer preferences could be driven by factors such as the increased cost of travel, an unstable job market, perceived or actual disposable consumer
income and wealth, outbreaks of contagious diseases or fears of war and acts of terrorism or other acts of violence. Consumer preferences also evolve over time due to a variety of factors, including demographic changes, which, for instance, have
resulted in recent growth in consumer demand for
non-gaming
offerings. Our success depends in part on our ability to anticipate the preferences of consumers and react timely to these trends, and any failure to
do so may negatively impact our results of operations. Aria, Bellagio and MGM Grand Las Vegas in particular may be affected by economic conditions in the Far East, and all of our Nevada resorts are affected by economic conditions in the United
States, and California in particular. A recession, economic slowdown or any other significant economic condition affecting consumers or corporations generally is likely to cause a reduction in visitation to our resorts, which would adversely affect
our operating results. For example, the prior recession and downturn in consumer and corporate spending had a negative impact on our results of operations.
In addition, since we expect a significant number of customers to come to MGM Macau from mainland China, general economic and market
conditions in China could impact our financial prospects. Any slowdown in economic growth or changes to Chinas current restrictions on travel and currency conversion or movements, including market impacts resulting from Chinas recent
anti-corruption campaign and related tightening of liquidity provided by
non-bank
lending entities and cross-border currency monitoring (including increased restrictions on Union Pay withdrawals and other ATM
limits on the withdrawal of patacas imposed by the government), could disrupt the number of visitors from mainland China to MGM Macau and/or the amounts they are willing to spend in the casino. For example, from 2008 through 2010, China
readjusted its visa policy toward
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Macau and limited the number of visits that some mainland Chinese citizens may make to Macau in a given time period. In addition, effective October 2013, China banned
zero-fare
tour groups involving no or low
up-front
payments and compulsory shopping, which were popular among visitors to Macau from mainland China, and in
December 2014 the Chinese government tightened the enforcement of visa transit rules for those seeking to enter Macau at the Gongbei border (including requirements to present an airplane ticket to a destination country, a visa issued by such
destination country and a valid Chinese passport). Most recently, in July 2017, the Chinese government, along with Macau authorities, implemented new facial recognition technology on ATM machines in Macau to strictly enforce the know your
customer regulations for mainland Chinese bank cardholders. It is unclear whether these and other measures will continue to be in effect, become more restrictive, or be readopted in the future. These developments have had, and any future
policy developments that may be implemented may have, the effect of reducing the number of visitors to Macau from mainland China, which could adversely impact tourism and the gaming industry in Macau.
Furthermore, our operations in Macau may be impacted by competition for limited labor resources. Our success in Macau will be impacted by our
ability to retain and hire employees. We compete with a large number of casino resorts for a limited number of employees and we anticipate that such competition will grow in light of new developments in Macau. While we seek employees from other
countries to adequately staff our resorts, certain Macau government policies limit our ability to import labor in certain job classifications (for instance, the Macau government requires that we only hire Macau residents as dealers in our casinos)
and any future government policies that freeze or cancel our ability to import labor could cause labor costs to increase. Finally, because additional casino projects are under construction and are to be developed in the future, existing
transportation infrastructure may need to be expanded to accommodate increased visitation to Macau. If transportation facilities to and from Macau are inadequate to meet the demands of an increased volume of gaming customers visiting Macau, the
desirability of Macau as a gaming destination, as well as the results of operations at our development in Cotai, Macau, could be negatively impacted.
We may not be able to sustain our continuous improvement efforts.
In 2015, we commenced an initiative for sustained growth and margin enhancement, focused on improving our business processes to optimize scale
for greater efficiency and lower costs throughout our business. While we believe these initiatives will continue to result in Adjusted EBITDA benefit, our optimization efforts may fail to achieve expected results or we may not be able to sustain our
historic efforts to produce continuous improvements. In addition, while we expect to continue to explore additional opportunities to drive further improvement to our business processes, we may not be able to achieve the historic Adjusted EBITDA
benefits at the same rate (or at all) and we may not be able to institutionalize the continuous improvement business practices that developed in connection with implementing the Profit Growth Plan.
Our ability to pay ongoing regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our holding
company structure, existing and future debt agreements entered into by us or our subsidiaries and state law requirements.
We intend to
pay ongoing regular quarterly cash dividends on our common stock. However, our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In addition, our ability to
pay dividends is restricted by certain covenants in our credit agreement, and because we are a holding company with no material direct operations, we are dependent on receiving cash from our operating subsidiaries to generate the funds from
operations necessary to pay dividends on our common stock. We expect our subsidiaries will continue to generate significant cash flow necessary to maintain quarterly dividend payments on our common stock; however, their ability to generate funds
will be subject to their operating results, cash requirements and financial condition, any applicable provisions of state law that may limit the amount of funds available to us, and compliance with covenants and financial ratios related to existing
or future agreements governing any indebtedness at such subsidiaries and any limitations in other agreements such subsidiaries may have with third parties. In addition, each of the companies in our
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corporate chain must manage its assets, liabilities and working capital in order to meet all of their respective cash obligations. As a consequence of these various limitations and restrictions,
future dividend payments may be reduced or eliminated. Any change in the level of our dividends or the suspension of the payment thereof could adversely affect the market price of our common stock.
A significant number of our domestic gaming facilities are leased and could experience risks associated with leased property, including risks relating to
lease termination, lease extensions, charges and our relationship with the lessor, which could have a material adverse effect on our business, financial position or results of operations.
We lease eleven of our destination resorts and The Park from a subsidiary of MGP pursuant to the master lease. The master lease has a term
of ten years with up to four additional five year extensions, subject to satisfaction of certain conditions. The master lease is commonly known as a
triple-net
lease. Accordingly, in addition to rent, we
are required to pay the following, among other things: (1) all facility maintenance, (2) all insurance required in connection with the leased properties and the business conducted on the leased properties, (3) taxes levied on or with
respect to the leased properties (other than taxes on the income of the lessor), (4) all capital expenditures, and (5) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the
leased properties. We are responsible for paying these expenses notwithstanding the fact that many of the benefits received in exchange for such costs shall accrue in part to MGP as owner of the associated facilities. In addition, if some of our
leased facilities should prove to be unprofitable or experience other issues that would warrant ceasing operations or if we should otherwise decide to exit a particular property, we would remain obligated for lease payments and other obligations
under the master lease even if we decided to cease operations at those locations unless we are able to transfer the rights with respect to a particular property in accordance with the requirements of the master lease. Our ability to transfer our
obligations under the master lease to a third-party with respect to individual properties should we decide to withdraw from a particular location, is limited to
non-Las
Vegas properties and no more than two
Las Vegas gaming properties and is subject to identifying a willing third-party who meets the requirements for a transferee set forth in the master lease. We may be unable to find an appropriate transferee willing to assume the obligations under the
master lease with respect to any such property. In addition, we could incur special charges relating to the closing of such facilities including sublease termination costs, impairment charges and other special charges that would reduce our net
income and could have a material adverse effect on our business, financial condition and results of operations. Furthermore, our obligation to pay rent as well as the other costs described above is absolute in virtually all circumstances, regardless
of the performance of the properties and other circumstances that might abate rent in leases that now place these risks on the tenant, such as certain events of casualty and condemnation.
Any financial, operational, regulatory or other potential challenges that may arise with respect to MGP, as our sole lessor for a significant portion of
our properties, may adversely impair our operations.
We lease a substantial number of the properties that we operate and manage, which
represents a significant portion of our operations, from MGP under the master lease. If MGP has financial, operational, regulatory or other challenges, there can be no assurance that MGP will be able to comply with its obligations under the master
lease or its other agreements with us. Failure on the part of MGP to fulfill its commitments could have a material adverse effect on our business, financial condition and results of operations.
James J. Murren, our Chairman, Daniel J. Taylor, one of our directors, and William J. Hornbuckle, Elisa C. Gois, and John M. McManus, members of senior
management, may have actual or potential conflicts of interest because of their positions at MGP.
James J. Murren serves as our
Chairman and as the Chairman of MGP. In addition, Daniel J. Taylor, one of our directors, is also a director of MGP and William J. Hornbuckle, Elisa C. Gois, and John M. McManus, members of our senior management, are also directors of MGP. While we
have procedures in place to address such situations and the organizational documents with respect to MGP contain provisions that reduce or
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eliminate duties (including fiduciary duties) to any MGP shareholder to the fullest extent permitted by law, these overlapping positions could nonetheless create, or appear to create, potential
conflicts of interest when our or MGPs management and directors pursue the same corporate opportunities, such as potential acquisition targets, or face decisions that could have different implications for us and MGP. Further, potential
conflicts of interest could arise in connection with the resolution of any dispute between us and MGP (or its subsidiaries) regarding the terms of the agreements governing the separation and the relationship, between us and MGP, such as under the
master lease. Potential conflicts of interest could also arise if we and MGP enter into any commercial or other adverse arrangements with each other in the future.
Despite our ability to exercise control over the affairs of MGP as a result of our ownership of the single outstanding Class B share of MGP, MGP has
adopted a policy under which certain transactions with us, including transactions involving consideration in excess of $25 million, must be approved in accordance with certain specified procedures, which could affect our ability to execute our
operational and strategic objectives.
We own the single outstanding Class B share of MGP. The Class B Share is a
non-economic
interest in MGP which does not provide its holder any rights to profits or losses or any rights to receive distributions from operations of MGP or upon liquidation or winding up of MGP, and which
represents a majority of the voting power of MGPs shares so long as the holder of the Class B share and its controlled affiliates (excluding MGP) aggregate beneficial ownership of the combined economic interests in MGP and the
Operating Partnership does not fall below 30%. We, therefore, have the ability to exercise significant control over MGPs affairs, including control over the outcome of all matters submitted to MGPs shareholders for approval.
MGPs operating agreement, however, provides that whenever a potential conflict of interest exists or arises between us or any of our affiliates (other than MGP and its subsidiaries), on the one hand, and MGP or any of its subsidiaries, on the
other hand, any resolution or course of action by MGPs board of directors in respect of such conflict of interest shall be conclusively deemed to be fair and reasonable to MGP if it is (i) approved by a majority of a conflicts committee
which consists solely of independent directors (which MGP refers to as Special Approval) (such independence determined in accordance with the New York Stock Exchanges listing standards, the standards established by the
Exchange Act to serve on an audit committee of a board of directors and certain additional independence requirements in our operating agreement), (ii) determined by MGPs board of directors to be fair and reasonable to MGP or
(iii) approved by the affirmative vote of the holders of at least a majority of the voting power of MGPs outstanding voting shares (excluding voting shares owned by us and our affiliates). Furthermore, MGPs operating agreement
provides that any transaction with a value, individually or in the aggregate, over $25 million between us or any of our affiliates (other than MGP and its subsidiaries), on the one hand, and MGP or any of its subsidiaries, on the other hand
(any such transaction (other than the exercise of rights by us or any of our affiliates (other than MGP and its subsidiaries) under any of the material agreements entered into on the closing day of MGPs formation transactions), a
Threshold Transaction), shall be permitted only if (i) Special Approval is obtained or (ii) such transaction is approved by the affirmative vote of the holders of at least a majority of the voting power of MGPs
outstanding voting shares (excluding voting shares owned by us and our affiliates). As a result, certain transactions, including any Threshold Transactions, that we may want to pursue with MGP and that could have significant benefit to us may
require Special Approval. There can be no assurance that the required approval will be obtained with respect to these transactions either from a conflicts committee comprised of independent MGP directors or the affirmative vote of a majority of the
shares not held by us and our affiliates. The failure to obtain such requisite consent could materially affect our ability and the cost to execute our operational and strategic objectives.
We have agreed not to have any interest or involvement in gaming businesses in China, Macau, Hong Kong and Taiwan, other than through MGM China.
In connection with the initial public offering of MGM China, the holding company that indirectly owns and operates MGM Macau, we entered into a
Deed of
Non-Compete
Undertakings with MGM China and Ms. Ho, Pansy Catilina Chiu King pursuant to which we are restricted from having any interest or involvement in gaming
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businesses in the Peoples Republic of China, Macau, Hong Kong and Taiwan, other than through MGM China. While gaming is currently prohibited in China, Hong Kong and Taiwan, if it is
legalized in the future our ability to compete in these locations could be limited until the earliest of (i) March 31, 2020, (ii) the date MGM Chinas ordinary shares cease to be listed on The Stock Exchange of Hong Kong Limited
or (iii) the date when our ownership of MGM China shares is less than 20% of the then issued share capital of MGM China.
The Macau
government can terminate MGM Grand Paradises subconcession under certain circumstances without compensating MGM Grand Paradise, exercise its redemption right with respect to the subconcession or refuse to grant MGM Grand Paradise an extension
of the subconcession in 2020, any of which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
The Macau government has the right to unilaterally terminate the subconcession in the event of fundamental
non-compliance
by MGM Grand Paradise with applicable Macau laws or MGM Grand Paradises basic obligations under the subconcession contract. MGM Grand Paradise has the opportunity to remedy any such
non-compliance
with its fundamental obligations under the subconcession contract within a period to be stipulated by the Macau government. Upon such termination, all of MGM Grand Paradises casino area premises
and gaming-related equipment would be transferred automatically to the Macau government without compensation to MGM Grand Paradise, and we would cease to generate any revenues from these operations. We cannot assure you that MGM Grand Paradise will
perform all of its obligations under the subconcession contract in a way that satisfies the requirements of the Macau government.
Furthermore, under the subconcession contract, MGM Grand Paradise is obligated to comply with any laws and regulations that the Macau
government might promulgate in the future. We cannot assure you that MGM Grand Paradise will be able to comply with these laws and regulations or that these laws and regulations would not adversely affect our ability to construct or operate our
Macau businesses. If any disagreement arises between MGM Grand Paradise and the Macau government regarding the interpretation of, or MGM Grand Paradises compliance with, a provision of the subconcession contract, MGM Grand Paradise will be
relying on a consultation and negotiation process with the Macau government. During any consultation or negotiation, MGM Grand Paradise will be obligated to comply with the terms of the subconcession contract as interpreted by the Macau government.
Currently, there is no precedent concerning how the Macau government will treat the termination of a concession or subconcession upon the occurrence of any of the circumstances mentioned above. The loss of the subconcession would require us to cease
conducting gaming operations in Macau, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, the subconcession contract expires on March 31, 2020. Unless the subconcession is extended, or legislation with regard to
reversion of casino premises is amended, all of MGM Grand Paradises casino premises and gaming-related equipment will automatically be transferred to the Macau government on that date without compensation to us, and we will cease to generate
any revenues from such gaming operations. Beginning on April 20, 2017, the Macau government may redeem the subconcession contract by providing us at least one years prior notice. In the event the Macau government exercises this redemption
right, MGM Grand Paradise is entitled to fair compensation or indemnity. The amount of such compensation or indemnity will be determined based on the amount of gaming and
non-gaming
revenue generated by MGM
Grand Paradise, excluding the convention and exhibition facilities, during the taxable year prior to the redemption, before deducting interest, depreciation and amortization, multiplied by the number of remaining years before expiration of the
subconcession. We cannot assure you that MGM Grand Paradise will be able to renew or extend the subconcession contract on terms favorable to MGM Grand Paradise or at all. We also cannot assure you that if the subconcession is redeemed, the
compensation paid to MGM Grand Paradise will be adequate to compensate for the loss of future revenues.
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MGM Grand Paradise is dependent upon gaming promoters for a significant portion of gaming revenues in
Macau.
Gaming promoters, who promote gaming and draw
high-end
customers to casinos, are
responsible for a significant portion of MGM Grand Paradises gaming revenues in Macau. With the rise in gaming in Macau and the recent reduction in the number of licensed gaming promoters in Macau and in the number of VIP rooms operated by
licensed gaming promoters, the competition for relationships with gaming promoters has increased. While MGM Grand Paradise is undertaking initiatives to strengthen relationships with gaming promoters, there can be no assurance that it will be able
to maintain, or grow, relationships with gaming promoters. In addition, continued reductions in, and new regulations governing, the gaming promoter segment may result in the closure of additional VIP rooms in Macau, including VIP rooms at MGM Macau.
If MGM Grand Paradise is unable to maintain or grow relationships with gaming promoters, or if gaming promoters are unable to develop or maintain relationships with our
high-end
customers (or if, as a result
of recent market conditions in Macau, gaming promoters encounter difficulties attracting patrons to come to Macau or experience decreased liquidity limiting their ability to grant credit to patrons). MGM Grand Paradises ability to grow gaming
revenues will be hampered. Furthermore, if existing VIP rooms at MGM Macau are closed there can be no assurance that MGM Grand Paradise will be able to locate acceptable gaming promoters to run such VIP rooms in the future in a timely manner or at
all.
In addition, the quality of gaming promoters is important to MGM Grand Paradises and our reputation and ability to continue to
operate in compliance with gaming licenses. While MGM Grand Paradise strives for excellence in associations with gaming promoters, we cannot assure you that the gaming promoters with whom MGM Grand Paradise is or becomes associated will meet the
high standards insisted upon. If a gaming promoter falls below MGM Grand Paradises standards, MGM Grand Paradise or we may suffer reputational harm or possibly sanctions from gaming regulators with authority over our operations.
We also grant credit lines to certain gaming promoters and any adverse change in the financial performance of those gaming promoters may
impact the recoverability of these loans.
We are subject to taxation by various governments and agencies and the rate of taxation in the jurisdictions
in which we operate could change in the future.
We are subject to tax by various governments and agencies, both in the U.S. and in
Macau. Changes in the rates of taxation, the amount of taxes we owe and the time when income is subject to taxation, the Macau income tax exemption or the imposition of foreign withholding taxes could increase our overall rate of taxation. Any of
these changes could materially impact our business, financial condition, results of operations and cash flows.
The future recognition of our foreign
tax credit deferred tax asset is uncertain, and the amount of valuation allowance we may apply against such deferred tax asset may change materially in future periods.
We currently have significant deferred tax assets resulting from foreign tax credit carryforwards that are available to reduce potential
taxable foreign-sourced income in future periods. We evaluate our foreign tax credit deferred tax asset for recoverability and record a valuation allowance to the extent that we determine it is not more likely than not such asset will be recovered.
This evaluation is based on all available evidence, including assumptions concerning future U.S. operating profits and our initial interpretations of the U.S. Tax Cuts and Jobs Act (the Tax Act) in the absence of regulatory or other
clarifying guidance. As a result, significant judgment is required in assessing the possible need for a valuation allowance and changes to our assumptions could result in a material change in the valuation allowance with a corresponding impact on
the provision for income taxes in the period including such change.
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Extreme weather conditions or climate change may cause property damage or interrupt business, which could harm
our business and results of operations.
Certain of our casino properties are located in areas that may be subject to extreme weather
conditions, including, but not limited to, hurricanes in the United States and severe typhoons in Macau. Such extreme weather conditions may interrupt our operations, damage our properties, and reduce the number of customers who visit our facilities
in such areas. In addition, our operations could be adversely impacted by a drought or other cause of water shortage. A severe drought of extensive duration experienced in Las Vegas or in the other regions in which we operate could adversely affect
our business and results of operations. Although we maintain both property and business interruption insurance coverage for certain extreme weather conditions, such coverage is subject to deductibles and limits on maximum benefits, including
limitation on the coverage period for business interruption, and we cannot assure you that we will be able to fully insure such losses or fully collect, if at all, on claims resulting from such extreme weather conditions. Furthermore, such extreme
weather conditions may interrupt or impede access to our affected properties and may cause visits to our affected properties to decrease for an indefinite period, which would have a material adverse effect on our business, financial condition,
results of operations and cash flows.
Because a majority of our major gaming resorts are concentrated on the Las Vegas Strip, we are subject to
greater risks than a gaming company that is more geographically diversified.
Given that a majority of our major resorts are
concentrated on the Las Vegas Strip, our business may be significantly affected by risks common to the Las Vegas tourism industry. For example, the cost and availability of air services and the impact of any events that disrupt air travel to and
from Las Vegas can adversely affect our business. We cannot control the number or frequency of flights to or from Las Vegas, but we rely on air traffic for a significant portion of our visitors. Reductions in flights by major airlines as a result of
higher fuel prices or lower demand can impact the number of visitors to our resorts. Additionally, there is one principal interstate highway between Las Vegas and Southern California, where a large number of our customers reside. Capacity
constraints of that highway or any other traffic disruptions may also affect the number of customers who visit our facilities.
We extend credit to a
large portion of our customers and we may not be able to collect gaming receivables.
We conduct a portion of our gaming activities on
a credit basis through the issuance of markers which are unsecured instruments. Table games players typically are issued more markers than slot players, and
high-end
players typically are issued more markers
than patrons who tend to wager lower amounts.
High-end
gaming is more volatile than other forms of gaming, and variances in
win-loss
results attributable to
high-end
gaming may have a significant positive or negative impact on cash flow and earnings in a particular quarter. Furthermore, the loss or a reduction in the play of the most significant of these
high-end
customers could have an adverse effect on our business, financial condition, results of operations and cash flows. We issue markers to those customers whose level of play and financial resources warrant, in
the opinion of management, an extension of credit. In addition, MGM Grand Paradise extends credit to certain gaming promoters and those promoters can extend credit to their customers. Uncollectible receivables from
high-end
customers and gaming promoters could have a significant impact on our results of operations.
While gaming debts evidenced by markers and judgments on gaming debts are enforceable under the current laws of Nevada, and Nevada judgments
on gaming debts are enforceable in all states under the Full Faith and Credit Clause of the U.S. Constitution, other jurisdictions may determine that enforcement of gaming debts is against public policy. Although courts of some foreign nations
will enforce gaming debts directly and the assets in the U.S. of foreign debtors may be reached to satisfy a judgment, judgments on gaming debts from United States courts are not binding on the courts of many foreign nations.
Furthermore, we expect that MGM Macau will be able to enforce its gaming debts only in a limited number of jurisdictions, including Macau. To
the extent MGM Macau gaming customers and gaming promoters are from
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other jurisdictions, MGM Macau may not have access to a forum in which it will be able to collect all of its gaming receivables because, among other reasons, courts of many jurisdictions do not
enforce gaming debts and MGM Macau may encounter forums that will refuse to enforce such debts. Moreover, under applicable law, MGM Macau remains obligated to pay taxes on uncollectible winnings from customers.
Even where gaming debts are enforceable, they may not be collectible. Our inability to collect gaming debts could have a significant negative
impact on our operating results.
We may incur impairments to goodwill, indefinite-lived intangible assets, or long-lived assets which could negatively
affect our future profits.
We review our goodwill, intangible assets and long-lived assets on an annual basis and during interim
reporting periods in accordance with the authoritative guidance. Significant negative trends, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth have resulted in write-downs and impairment
charges in the past and, if one or more of such events occurs in the future, additional impairment charges or write-downs may be required in future periods. For instance, in 2015, we recorded a
non-cash
impairment charge of $1.5 billion to reduce the historical carrying value of goodwill related to the MGM China reporting unit. If we are required to record additional impairment charges or write-downs, this could have a material adverse impact
on our consolidated results of operations.
Leisure and business travel, especially travel by air, are particularly susceptible to global geopolitical
events, such as terrorist attacks, other acts of violence or acts of war or hostility.
We are dependent on the willingness of our
customers to travel by air. Since most of our customers travel by air to our Las Vegas and Macau properties, any terrorist act or other acts of violence, outbreak of hostilities, escalation of war, or any actual or perceived threat to the security
of travel by air, could adversely affect our financial condition, results of operations and cash flows. Furthermore, although we have been able to purchase some insurance coverage for certain types of terrorist acts, insurance coverage against loss
or business interruption resulting from war and some forms of terrorism continues to be unavailable.
Co-investing
in our properties, including our investment in CityCenter, decreases our ability to manage risk.
In addition to acquiring or developing hotels and resorts or acquiring companies that complement our business directly, we have from
time to time invested, and expect to continue to invest, as a
co-investor.
Co-investors
often have shared control over the operation of the property. Therefore, the
operation of such properties is subject to inherent risk due to the shared nature of the enterprise and the need to reach agreements on material matters. In addition, investments with other investors may involve risks such as the possibility that
the
co-investor
might become bankrupt or not have the financial resources to meet its obligations, or have economic or business interests or goals that are inconsistent with our business interests or goals, or
be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. Consequently, actions by a
co-investor
might subject hotels and resorts owned by such
entities to additional risk. Further, we may be unable to take action without the approval of our
co-investors.
Alternatively, our
co-investors
could take actions
binding on the property without our consent. Additionally, should a
co-investor
become bankrupt, we could become liable for its share of liabilities.
For instance, CityCenter, which is 50% owned and managed by us, has a significant amount of indebtedness, which could adversely affect
its business and its ability to meet its obligations. If CityCenter is unable to meet its financial commitments and we and our
co-investor
are unable to support future funding requirements, as necessary, such
event could have adverse financial consequences to us. In addition, the agreements governing CityCenters indebtedness subject CityCenter and its subsidiaries to significant financial and other restrictive covenants, including restrictions on
its ability to incur additional indebtedness, place liens
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upon assets, make distributions to us, make certain investments, consummate certain asset sales, enter into transactions with affiliates (including us) and merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets. The CityCenter credit facility also includes certain financial covenants that require CityCenter to maintain a maximum total net leverage
ratio (as defined in CityCenters credit facility) for each quarter. We cannot be sure that CityCenter will be able to meet this test in the future or that the lenders will waive any failure to meet the test.
Any of our future construction, development or expansion projects will be subject to significant development and construction risks, which could have a
material adverse impact on related project timetables, costs and our ability to complete the projects.
Any of our future construction,
development or expansion projects will be subject to a number of risks, including:
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lack of sufficient, or delays in the availability of, financing;
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changes to plans and specifications;
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engineering problems, including defective plans and specifications;
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shortages of, and price increases in, energy, materials and skilled and unskilled labor, and inflation in key supply markets;
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delays in obtaining or inability to obtain necessary permits, licenses and approvals;
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changes in laws and regulations, or in the interpretation and enforcement of laws and regulations, applicable to gaming, leisure, residential, real estate development or construction projects;
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labor disputes or work stoppages;
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availability of qualified contractors and subcontractors;
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disputes with and defaults by contractors and subcontractors;
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personal injuries to workers and other persons;
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environmental, health and safety issues, including site accidents and the spread of viruses;
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weather interferences or delays;
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fires, typhoons and other natural disasters;
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geological, construction, excavation, regulatory and equipment problems; and
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other unanticipated circumstances or cost increases.
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The occurrence of any of these
development and construction risks could increase the total costs, delay or prevent the construction, development, expansion or opening or otherwise affect the design and features of any future projects which we might undertake. For instance, we
currently expect the total development costs of our Cotai project to be approximately $3.4 billion, excluding development fees eliminated in consolidation, capitalized interest and land-related costs, and we currently expect total development
costs of our Massachusetts project to be approximately $960 million, excluding capitalized interest and land related costs. While we believe that the overall budgets for these developments are reasonable, these development costs are estimates
and the actual development costs may be higher than expected. We cannot guarantee that our construction costs or total project costs for future projects, including our development in Massachusetts, will not increase beyond amounts initially budgeted
or that the expected design and features of current or future projects will not change. In addition, the regulatory approvals associated with our development projects may require us to open future casino resorts by a certain specified time and to
the extent we are unable to meet those deadlines, and any such deadlines are not extended, we may lose our regulatory approval to open a casino resort in a proposed jurisdiction or incur payment penalties in connection with any delays which could
have an adverse effect on our results of operations and financial condition.
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We also make significant capital expenditures to maintain and upgrade our resorts, which may
disrupt operations and displace revenue at the properties, including revenue lost while rooms, restaurants and meeting spaces are under renovation and out of service.
We are required to commence gaming operations at MGM Springfield no later than September 2019, one year from the opening date approved by the Massachusetts
Gaming Commission. If we are unable to meet this deadline, the Massachusetts Gaming Commission may suspend or revoke our gaming license.
Pursuant to the Massachusetts Expanded Gaming Act, we are required to commence gaming operations at MGM Springfield no later than September
2019, one year from the opening date approved by the Massachusetts Gaming Commission (the MGC). If MGM Springfield fails to begin gaming operations by September 2019 or receive an extension, MGM Springfield is subject to suspension or
revocation of its gaming license by the MGC and may, after being found by the MGC after a hearing to have acted in bad faith in its application, be assessed a fine of up to $50,000,000. Failure to meet the deadline could have an adverse effect on
our financial condition, results of operations or cash flows from this property.
Our insurance coverage may not be adequate to cover all possible
losses that our properties could suffer. In addition, our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future.
Although we have all risk property insurance coverage for our operating properties, which covers damage caused by a casualty loss
(such as fire, natural disasters, acts of war, or terrorism or other acts of violence), each policy has certain exclusions. In addition, our property insurance coverage is in an amount that may be significantly less than the expected replacement
cost of rebuilding the facilities if there was a total loss. Our level of insurance coverage also may not be adequate to cover all losses in the event of a major casualty. In addition, certain casualty events, such as labor strikes, nuclear events,
acts of war, loss of income due to cancellation of room reservations or conventions due to fear of terrorism or other acts of violence, loss of electrical power due to catastrophic events, rolling blackouts or otherwise, deterioration or corrosion,
insect or animal damage, and pollution, may not be covered at all under our policies. Therefore, certain acts could expose us to substantial uninsured losses.
In addition to the damage caused to our properties by a casualty loss, we may suffer business disruption as a result of these events or be
subject to claims by third parties that may be injured or harmed. While we carry business interruption insurance and general liability insurance, this insurance may not be adequate to cover all losses in any such event.
We renew our insurance policies (other than our builders risk insurance) on an annual basis. The cost of coverage may become so high
that we may need to further reduce our policy limits, further increase our deductibles, or agree to certain exclusions from our coverage.
Any failure
to protect our trademarks could have a negative impact on the value of our brand names and adversely affect our business.
The
development of intellectual property is part of our overall business strategy, and we regard our intellectual property to be an important element of our success. While our business as a whole is not substantially dependent on any one trademark or
combination of several of our trademarks or other intellectual property, we seek to establish and maintain our proprietary rights in our business operations through the use of trademarks. We file applications for, and obtain trademarks in, the
United States and in foreign countries where we believe filing for such protection is appropriate. Despite our efforts to protect our proprietary rights, parties may infringe our trademarks and our rights may be invalidated or unenforceable. The
laws of some foreign countries do not protect proprietary rights to as great an extent as the laws of the United States. Monitoring the unauthorized use of our intellectual property is difficult. Litigation may be necessary to enforce our
intellectual property rights or
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to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resource. We cannot assure you that all of the
steps we have taken to protect our trademarks in the United States and foreign countries will be adequate to prevent imitation of our trademarks by others. The unauthorized use or reproduction of our trademarks could diminish the value of our brand
and its market acceptance, competitive advantages or goodwill, which could adversely affect our business.
We are subject to risks associated with
doing business outside of the United States.
Our operations outside of the United States are subject to risks that are inherent in
conducting business under
non-United
States laws, regulations and customs. In particular, the risks associated with the operation of MGM Macau or any future operations in which we may engage in any other
foreign territories, include:
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changes in laws and policies that govern operations of companies in Macau or other foreign jurisdictions;
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changes in
non-United
States government programs;
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possible failure by our employees or agents to comply with anti-bribery laws such as the United States Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;
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general economic conditions and policies in China, including restrictions on travel and currency movements;
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difficulty in establishing, staffing and managing
non-United
States operations;
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different labor regulations;
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changes in environmental, health and safety laws;
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outbreaks of diseases or epidemics;
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potentially negative consequences from changes in or interpretations of tax laws;
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political instability and actual or anticipated military and political conflicts;
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economic instability and inflation, recession or interest rate fluctuations; and
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uncertainties regarding judicial systems and procedures.
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These risks, individually or in the
aggregate, could have an adverse effect on our results of operations and financial condition. We are also exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates. If the United States dollar
strengthens in relation to the currencies of other countries, our United States dollar reported income from sources where revenue is denominated in the currencies of other such countries will decrease.
Any violation of the Foreign Corrupt Practices Act or any other similar anti-corruption laws could have a negative impact on us.
A significant portion of our revenue is derived from operations outside the United States, which exposes us to complex foreign and
U.S. regulations inherent in doing cross-border business and in each of the countries in which we transact business. We are subject to compliance with the United States Foreign Corrupt Practices Act (FCPA) and other similar
anti-corruption laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. While our employees and agents are required to comply
with these laws, we cannot be sure that our internal policies and procedures will always protect us from violations of these laws, despite our commitment to legal compliance and corporate ethics. Violations of these laws by us or our
non-controlled
ventures may result in severe criminal and civil sanctions as well as other penalties against us, and the Commission and U.S. Department of Justice continue to vigorously pursue enforcement of the
FCPA. The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value, financial condition, and results of operations.
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We face risks related to pending claims that have been, or future claims that may be, brought against us.
Claims have been brought against us and our subsidiaries in various legal proceedings, and additional legal and tax claims arise from
time to time. We may not be successful in the defense or prosecution of our current or future legal proceedings, which could result in settlements or damages that could significantly impact our business, financial condition, results of operations
and reputation. See Legal Proceedings in our Annual Report on
Form 10-K
for the year ended December 31, 2018 and in our Quarterly Report on
Form 10-Q
for the period ended March 31, 2018.
A significant portion of our labor force is covered
by collective bargaining agreements.
Work stoppages and other labor problems could negatively affect our business and results of
operations. As of December 31, 2017, approximately 36,000 of our employees are covered by collective bargaining agreements. The collective bargaining agreements covering most of our Las Vegas union employees expire in 2018, and on May 22,
2018, a labor union representing approximately 25,000 employees across 10 of our properties (including CityCenter) voted to authorize a strike at any time after the expiration of the current agreement on May 31, 2018. On June 2, 2018, we
reached a tentative five-year agreement with the labor union, which is subject to a ratification vote by members of the labor union on June 19, 2018. There can be no assurances that the agreement will be formally ratified. A prolonged dispute with
these or any other covered employees, or any other labor unrest, strikes or other business interruptions in connection with labor negotiations or others could have an adverse impact on our operations. Further, adverse publicity in the marketplace
related to union messaging could further harm our reputation and reduce customer demand for our services. Also, wage and/or benefit increases resulting from new labor agreements may be significant and could also have an adverse impact on our results
of operations. For instance, Beau Rivage is currently engaged in negotiations for an initial collective bargaining agreement with a council of unions representing various hotel and food and beverage constituencies, Borgata will be engaged in
negotiations with three unions in 2018, and MGM National Harbor is in negotiations with one union. In addition, to the extent that our
non-union
employees join unions, we would have greater exposure to risks
associated with labor problems. Furthermore, we may have, or acquire in the future, multi-employer plans that are classified as endangered, seriously endangered, or critical status. For instance, Borgatas
most significant plan as of December 31, 2017 is the Legacy Plan of the National Retirement Fund, which has been listed in critical status and is subject to a rehabilitation plan. Plans in these classifications must adopt measures
to improve their funded status through a funding improvement or rehabilitation plan, which may require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to retiree
benefits. In addition, while Borgata has no current intention to withdraw from these plans, a withdrawal in the future could result in the incurrence of a contingent liability that would be payable in an amount and at such time (or over a period of
time) that would vary based on a number of factors at the time of (and after) withdrawal. Any such additional costs may be significant.
Our business
is particularly sensitive to energy prices and a rise in energy prices could harm our operating results.
We are a large consumer of
electricity and other energy and, therefore, higher energy prices may have an adverse effect on our results of operations. Accordingly, increases in energy costs may have a negative impact on our operating results. Additionally, higher electricity
and gasoline prices that affect our customers may result in reduced visitation to our resorts and a reduction in our revenues.
The failure to maintain
the integrity of our computer systems and internal customer information could result in damage of reputation and/or subject us to fines, payment of damages, lawsuits or restrictions on our use or transfer of data.
We collect and store information relating to our employees, guests and others for various business purposes, including marketing and
promotional purposes. The collection and use of personal data are governed by privacy
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laws and regulations enacted in the United States and other jurisdictions around the world. Privacy laws and regulations continue to evolve and on occasion may be inconsistent from one
jurisdiction to another. Various federal, state and foreign legislative or regulatory bodies may enact or adopt new or additional laws and regulations concerning privacy, data retention, data transfer, and data protection issues. For example, the
European Union has adopted a data protection regulation, known as the General Data Protection Regulation, which will become fully enforceable in May 2018 that includes operational and compliance requirements that are different from those currently
in place and that also include significant penalties for
non-compliance.
Compliance with
applicable privacy laws and regulations may increase our operating costs and/or adversely impact our ability to market our products, properties and services to our guests. In addition,
non-compliance
with
applicable privacy laws and regulations by us (or in some circumstances
non-compliance
by third parties engaged by us), including accidental loss, inadvertent disclosure, unapproved dissemination or a breach
of security on systems storing our data may result in damage of reputation and/or subject us to fines, payment of damages, lawsuits or restrictions on our use or transfer of data. We rely on proprietary and commercially available systems, software,
tools and monitoring to provide security for processing, transmission and storage of customer and employee information, such as payment card and other confidential or proprietary information. Our data security measures are reviewed and evaluated
regularly; however, they might not protect us against increasingly sophisticated and aggressive threats including, but not limited to, computer malware, viruses, and hacking and phishing attacks by third parties. In addition, while we maintain cyber
risk insurance to assist in the cost of recovery from a significant cyber event, such coverage may not be sufficient.
We also rely
extensively on computer systems to process transactions, maintain information and manage our businesses. Disruptions in the availability of our computer systems, through cyber-attacks or otherwise, could impact our ability to service our customers
and adversely affect our sales and the results of operations. For instance, there has been an increase in criminal cyber security attacks against companies where customer and company information has been compromised and company data has been
destroyed. Our information systems and records, including those we maintain with our third-party service providers, may be subject to cyber security breaches in the future. In addition, our third-party information system service providers face risks
relating to cyber security similar to ours, and we do not directly control any of such parties information security operations. A significant theft, loss or fraudulent use of customer or company data maintained by us or by a third-party
service provider could have an adverse effect on our reputation, cause a material disruption to our operations and management team, and result in remediation expenses, regulatory penalties and litigation by customers and other parties whose
information was subject to such attacks, all of which could have a material adverse effect on our business, results of operations and cash flows.
We
are subject to risks related to corporate social responsibility and reputation.
Many factors influence our reputation and the value of
our brands including the perception held by our customers, business partners, other key stakeholders and the communities in which we do business. Our business faces increasing scrutiny related to environmental, social and governance activities and
risk of damage to our reputation and the value of our brands if we fail to act responsibly in a number of areas, such as environmental stewardship, supply chain management, climate change, diversity and inclusion, workplace conduct, human rights,
philanthropy and support for local communities. Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material adverse effect on our
business, results of operations and cash flows.
We may seek to expand through investments in other businesses and properties or through alliances or
acquisitions, and we may also seek to divest some of our properties and other assets, any of which may be unsuccessful.
We intend to
consider strategic and complementary acquisitions and investments in other businesses, properties or other assets. Furthermore, we may pursue any of these opportunities in alliance with third parties,
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including MGP. Acquisitions and investments in businesses, properties or assets, as well as these alliances, are subject to risks that could affect our business, including risks related to:
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spending cash and incurring debt;
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assuming contingent liabilities;
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unanticipated issues in integrating information, communications and other systems;
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unanticipated incompatibility of purchasing, logistics, marketing and administration methods;
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retaining key employees; and
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consolidating corporate and administrative infrastructures.
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We cannot assure you that we will
be able to identify opportunities or complete transactions on commercially reasonable terms or at all, or that we will actually realize any anticipated benefits from such acquisitions, investments or alliances. In addition, even if we are able to
successfully integrate new assets and businesses, the integration of such assets and businesses may result in unanticipated costs, competitive responses, loss or customer or other business relationships and the diversion of management attention.
In addition, we periodically review our business to identify properties or other assets that we believe either are
non-core,
no longer complement our business, are in markets which may not benefit us as much as other markets or could be sold at significant premiums. From time to time, we may attempt to sell these identified
properties and assets. There can be no assurance, however, that we will be able to complete dispositions on commercially reasonable terms or at all.
If the jurisdictions in which we operate increase gaming taxes and fees, our results could be adversely affected.
State and local authorities raise a significant amount of revenue through taxes and fees on gaming activities. From time to time, legislators
and government officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry. Periods of economic downturn or uncertainty and budget deficits may intensify such efforts to raise revenues through
increases in gaming taxes. If the jurisdictions in which we operate were to increase gaming taxes or fees, depending on the magnitude of the increase and any offsetting factors, our financial condition and results of operations could be materially
adversely affected. For instance, income generated from gaming operations of MGM Grand Paradise currently has the benefit of a corporate tax exemption in Macau, which exempts us from paying the 12% complementary tax on profits generated by the
operation of casino games. This exemption is effective through March 31, 2020, which also runs concurrent with the end of the term of the current gaming subconcession. Due to the uncertainty concerning taxation after the subconcession renewal
process, we cannot assure you that any extensions of the tax exemption will be granted beyond March 31, 2020.
Conflicts of interest may arise
because certain of our directors and officers are also directors of MGM China, the holding company for MGM Grand Paradise which owns and operates MGM Macau.
As a result of the initial public offering of shares of MGM China common stock, MGM China now has stockholders who are not affiliated with us,
and we and certain of our officers and directors who also serve as officers and/or directors of MGM China may have conflicting fiduciary obligations to our stockholders and to the minority stockholders of MGM China. Decisions that could have
different implications for us and MGM China, including contractual arrangements that we have entered into or may in the future enter into with MGM China, may give rise to the appearance of a potential conflict of interest or an actual conflict of
interest.
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DE
SCRIPTION OF NOTES
You can find the definitions of certain terms used in this description under the heading Certain Definitions. In this description,
the words MGM Resorts International, we, us and our refer only to the single corporation MGM Resorts International, a Delaware corporation, and not to any of its Subsidiaries.
MGM Resorts International will issue the % senior notes due 2025, which we refer to as the Notes,
pursuant to this prospectus supplement. The Notes will be issued under an Indenture dated as of March 22, 2012 (the Base Indenture), as supplemented by a sixth supplemental indenture to be dated as of
, 2018 among MGM Resorts International, the Subsidiary Guarantors (as defined below) and U.S. Bank National Association, as
trustee (the Trustee); the Base Indenture as so supplemented, the Indenture. The terms of the Notes include those provisions contained in the Indenture and certain provisions of the Trust Indenture Act of 1939, as
amended (the TIA), incorporated by the terms of the Indenture.
The following description is a summary of the material
provisions of the Indenture. This summary does not restate the Indenture in its entirety. We urge you to read the Indenture because the Indenture, and not this description, defines your rights as a holder of the Notes. Copies of the Indenture may be
obtained from MGM Resorts International.
Ranking
The Notes will be:
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general senior unsecured obligations of MGM Resorts International, pari passu or senior in right of payment to all existing and future Indebtedness of MGM Resorts International;
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guaranteed on a senior basis by each of the Subsidiary Guarantors (as defined below) (other than Elgin Sub and MDDC (and any other future Subsidiaries that require approval from a Gaming Authority in order to execute
and deliver a Subsidiary Guarantee), unless and until regulatory approval for their Subsidiary Guarantees (as defined below) is obtained, and, with respect to MDDHC, unless and until regulatory approval for the Subsidiary Guarantee of MDDC is
approved, with each such Subsidiary Guarantee being unsecured;
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senior in right of payment to future Indebtedness that may be subordinated to the Notes and the Subsidiary Guarantees;
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effectively junior to our secured Indebtedness, including (a) Indebtedness under the Credit Facility and the related guarantees, which is secured by the principal properties of Bellagio, LLC and MGM Grand Hotel and
(b) any future secured Indebtedness permitted to be incurred in accordance with the terms of the Notes, to the extent of the value of the assets securing such Indebtedness; and
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effectively subordinated to all Indebtedness and other obligations of the
non-guarantor
Subsidiaries, including (a) until regulatory approval for its Subsidiary Guarantee is
obtained, all Indebtedness of Elgin Sub and MDDC (and any other future Subsidiaries that require approval from a Gaming Authority in order to execute and deliver a Subsidiary Guarantee), (b) until regulatory approval for the Subsidiary
Guarantee of MDDC is obtained, MDDHC, (c) all Indebtedness of MGM China and MGM Grand Paradise and their respective Subsidiaries and (d) any indebtedness incurred by MGM National Harbor, Blue Tarp, MGM Detroit, MGP and any of their
respective Subsidiaries.
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As of March 31, 2018,
non-guarantor
Subsidiaries had
approximately $6.1 billion aggregate principal amount of Indebtedness outstanding (excluding intercompany Indebtedness). As of March 31, 2018, none of Elgin Sub, MDDC or MDDHC had any Indebtedness other than intercompany indebtedness and
their guarantees of the senior credit facility and the Existing Senior Notes and, in the case of MDDC, Indebtedness incurred in the ordinary course of business.
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The Indenture does not contain any limitation on the amount of Indebtedness MGM Resorts
International or its Subsidiaries may Incur, but limits liens securing Indebtedness of MGM Resorts International and the Subsidiary Guarantors as set forth below under Additional Covenants of MGM Resorts InternationalLimitation on
Liens and Exempted Liens and Sale and Leaseback Transactions.
Except as described under Merger,
Consolidation or Sale of Assets or Additional Covenants of MGM Resorts International below, the Indenture does not contain any provisions that would afford holders of the Notes protection in the event of (i) a highly
leveraged or similar transaction involving MGM Resorts International or any of its Subsidiaries, or (ii) a reorganization, restructuring, merger or similar transaction involving MGM Resorts International or any of its Subsidiaries that may
adversely affect the holders of the Notes. In addition, subject to the limitations set forth under Merger, Consolidation or Sale of Assets and Additional Covenants of MGM Resorts International below and certain
restrictions under instruments governing our Credit Facility, MGM Resorts International or any of its Subsidiaries may, in the future, enter into certain transactions that would increase the amount of Indebtedness of MGM Resorts International or its
Subsidiaries or substantially reduce or eliminate the assets of MGM Resorts International or its Subsidiaries, which may have an adverse effect on MGM Resorts Internationals ability to service its Indebtedness, including the Notes.
Principal, Maturity and Interest
The
Notes will be issued in an initial aggregate principal amount of $500,000,000 and will mature on , 2025. In addition, we may
issue an unlimited amount of additional notes under the indenture from time to time after this offering. We may create and issue additional notes with the same terms as the Notes offered hereby so that the additional notes will form a single class
with the Notes offered hereby. We will issue the Notes in denominations of $2,000 and integral multiples of $1,000.
Interest on the Notes
will accrue at the rate of % per annum. Interest on the Notes will be payable semiannually in arrears on and
of each year until maturity, beginning on , 2018. MGM
Resorts International will make each interest payment to the holders of record of the Notes on the immediately preceding and
. Interest will be computed on the basis of
a 360-day
year comprised of
twelve 30-day
months.
Principal of, premium, if any, and interest on the Notes will be payable at the office or agency of MGM Resorts International
maintained for such purpose within the City and State of New York or, at the option of MGM Resorts International, payment of interest may be made by check mailed to the holders of the Notes at their respective addresses set forth in the register of
holders;
provided
that all payments of principal, premium, if any, and interest with respect to the Notes represented by one or more global notes registered in the name of or held by DTC (as defined below) or its nominee will be made by wire
transfer of immediately available funds to the accounts specified by the holder or holders thereof. Until otherwise designated by MGM Resorts International, MGM Resorts Internationals office or agency in New York will be the office of the
Trustee maintained for such purpose.
Subsidiary Guarantees
MGM Resorts Internationals payment Obligations under the Notes will be jointly and severally guaranteed (the Subsidiary
Guarantees) by each of the Subsidiaries that is a guarantor under any series of our Existing Senior Notes and the Credit Facility (the Subsidiary Guarantors). In the event that any Subsidiary Guarantor is no longer designated as a
guarantor under any series of the Existing Senior Notes, the Credit Facility or any of our future capital markets Indebtedness (the Reference Indebtedness), that Subsidiary Guarantor will be released and relieved of its obligations under
its Subsidiary Guarantee of the Notes;
provided
that any transaction related to such release is carried out pursuant to and in accordance with all other applicable provisions of the Indenture.
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Our Subsidiaries that are not guarantors under our Existing Senior Notes or Credit Facility will
not guarantee the Notes. The
non-guarantor
Subsidiaries include all of our
non-U.S. Subsidiaries
and their U.S. holding companies. The
non-guarantor
Subsidiaries will also include: (a) certain domestic Subsidiaries that do not guarantee the Reference Indebtedness (such as MGM National Harbor, Blue Tarp, MGM Detroit, MGP, MGM China, MGM Grand
Paradise and any of their respective Subsidiaries); (b) the Insurance Subsidiaries; (c) until such time when we have received approval from the Illinois Gaming Board or the New Jersey Division of Gaming Enforcement, as applicable, Elgin Sub
(which owns 50% of Grand Victoria) and MDDC (and any other Subsidiary Guarantors subject to the oversight of the Illinois Gaming Board or the New Jersey Division of Gaming Enforcement); (d) until such time when we have received approval from
the New Jersey Division of Gaming Enforcement in respect of MDDC, MDDHC; and (e) until such time when we have received approval from the relevant Gaming Authority, such other Subsidiaries that may be formed or acquired after the date of the
Indenture that are subject to the jurisdiction of a Gaming Authority that requires approval prior to the execution and delivery of a guarantee.
The Subsidiary Guarantee of each Subsidiary Guarantor will be
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senior in right of payment to the guarantees of, or obligations under future Indebtedness of the Subsidiary Guarantor that may be subordinated to its Subsidiary Guarantee of the Notes;
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effectively junior to our secured Indebtedness, including (a) Indebtedness under the Credit Facility and the related guarantees, which is secured by the principal properties of Bellagio, LLC and MGM Grand Hotel,
LLC and (b) any future secured Indebtedness permitted to be incurred in accordance with the terms of the Notes, to the extent of the value of the assets securing such Indebtedness; and
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effectively subordinated to all Indebtedness and other obligations of the
non-guarantor
Subsidiaries, including (a) until regulatory approval for its Subsidiary Guarantee is
obtained, Elgin Sub and MDDC (and any other future Subsidiaries that require approval from a Gaming Authority in order to execute and deliver a Subsidiary Guarantee), (b) until regulatory approval for the Subsidiary Guarantee of MDDC is
obtained, MDDHC, (c) all indebtedness of MGM China and MGM Grand Paradise and their respective Subsidiaries, (d) any indebtedness incurred by MGM National Harbor, Blue Tarp, MGM Detroit, MGP and any of their respective Subsidiaries and
(e) until regulatory approval from the relevant Gaming Authority, such other Subsidiaries that may be formed or acquired after the date of the Indenture that are subject to the jurisdiction of a Gaming Authority that requires approval prior to
the execution and delivery of a guarantee.
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Until such time as we have obtained such approval from the Illinois Gaming
Board, the New Jersey Division of Gaming Enforcement or any other Gaming Authority under whose jurisdiction approval is required in order to execute and deliver a Subsidiary Guarantee, which approvals may not be obtained at all, Elgin Sub, MDDC and
any other Subsidiary Guarantors formed or acquired after the date of the Indenture that are subject to the oversight of the Illinois Gaming Board, the New Jersey Division of Gaming Enforcement or such other Gaming Authority are prohibited from
issuing a guarantee of the Notes. In addition, MDDHC, the parent holding company of MDDC, will not issue a guarantee of the Notes until the New Jersey Division of Gaming Enforcement approves the issuance of a Subsidiary Guarantee by MDDC. See
Risk Factors Until we receive the necessary approvals from the Illinois Gaming Board and the New Jersey Division of Gaming Enforcement, as applicable, Elgin Sub, MDDC and any other subsidiary guarantors subject to the oversight of the
Illinois Gaming Board or the New Jersey Division of Gaming Enforcement, or for whom the issuance of a subsidiary guarantee is conditioned on approvals to be issued by such authorities, will not be able to guarantee the notes. The Indenture
will provide that we will use commercially reasonable efforts to obtain such approval. See Regulation and Licensing.
The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. This may not be effective to protect the Subsidiary Guarantee from being voided under
fraudulent transfer law, or may eliminate the Subsidiary Guarantors obligations or reduce such obligations to an amount that effectively makes the Subsidiary Guarantee worthless.
S-39
No Subsidiary Guarantor will be permitted to consolidate with or merge with or into (whether
or not such Subsidiary Guarantor is the surviving Person) another corporation or other Person, whether or not affiliated with such Subsidiary Guarantor unless:
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subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee and the Indenture pursuant to a supplemental indenture in form and substance reasonably satisfactory to the trustee; and
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immediately after giving effect to such transaction, no Default or Event of Default exists.
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The Indenture will provide that in the event of (a) a sale or other disposition of all or substantially all of the assets of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise or (b) a sale or other disposition of all or substantially all of the capital stock of any Subsidiary Guarantor, then the Subsidiary Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all or substantially all of the capital stock of such Subsidiary Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of the Subsidiary Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee, except in the event of a sale or other disposition to MGM Resorts International or any other Subsidiary
Guarantor. Notwithstanding the foregoing, any Subsidiary Guarantor will automatically be released from all obligations under its Subsidiary Guarantee, and such Subsidiary Guarantee shall thereupon terminate and be discharged and of no further force
and effect, upon the merger or consolidation of any Subsidiary Guarantor with and into MGM Resorts International or another Subsidiary Guarantor that is the surviving Person in such merger or consolidation, or upon the liquidation or dissolution of
such Subsidiary Guarantor following the transfer of all of its assets to MGM Resorts International or another Subsidiary Guarantor.
Optional
Redemption
The Notes are redeemable at our election, in whole or in part, at any time prior to
, 2025 (the date that is three months prior to the maturity date of the Notes), at a redemption price equal to the greater of:
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100% of the principal amount of the Notes to be redeemed; or
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as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of
interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis (assuming
a 360-day
year consisting of
twelve 30-day
months) at the Adjusted Treasury Rate, plus 50 basis points,
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plus, in either of the above cases, accrued and unpaid
interest to the date of redemption on the Notes to be redeemed. The Notes are redeemable at our election, in whole or in part, at any time on or after
, 2025 (the date that is three months prior to the maturity date of the Notes) at a redemption price of 100% of the
principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the date of redemption on the Notes to be redeemed.
Adjusted Treasury Rate
means, with respect to any redemption date:
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the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated H.15(519) or any successor publication
which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption Treasury Constant
Maturities, for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Remaining Life (as defined below), yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or
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if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.
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The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the redemption date or, in the case of a satisfaction and
discharge or a defeasance, on the third Business Day prior to the date on which MGM Resorts International deposits the amount required under the Indenture most nearly equal to the period from the redemption date to the maturity date.
Comparable Treasury Issue
means the United States Treasury security selected by an Independent Investment Banker as having
a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity
to the remaining term of such securities (Remaining Life).
Comparable Treasury Price
means (1) the
average of four Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.
Independent Investment Banker
means one of the
Reference Treasury Dealers appointed by us.
Reference Treasury Dealer
means any primary U.S. Government
securities dealer in New York City selected by us.
Reference Treasury Dealer Quotations
means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Independent Investment Banker at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.
We will mail a notice of redemption at least 30 days but not more than 60 days before the redemption date to each holder
of Notes to be redeemed. Any notice to holders of a redemption will state, among other things, the redemption price (or how the redemption price will be calculated if not a fixed amount or subject to change) and date. A notice of redemption may
provide that the optional redemption described in such notice is conditioned upon the occurrence of certain events before the redemption date. Such notice of conditional redemption will be of no effect unless all such conditions to the redemption
have occurred before the redemption date or have been waived by us. If any of these events fail to occur and are not waived by us, we will be under no obligation to redeem the notes or pay the holders any redemption proceeds and our failure to so
redeem the notes will not be considered a default or event of default. In the event that any of these conditions fail to occur or are not waived by us, we will promptly notify the trustee in writing that the conditions precedent to such redemption
have failed to occur and the notes will not be redeemed.
If we elect to partially redeem the Notes, the trustee will select the Notes to
be redeemed consistent with the procedures of DTC (as defined below).
Unless we default in payment of the redemption price (or, in the
case of a conditional redemption, all of the conditions have not been met or waived by us), on and after the redemption date, interest will cease to accrue on the Notes or portion thereof called for redemption.
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Mandatory Redemption
MGM Resorts International will not be required to make any mandatory redemption or sinking fund payments in respect of the Notes.
Mandatory Disposition Pursuant to Gaming Laws
Each holder, by accepting a Note, shall be deemed to have agreed that if the gaming authority of any jurisdiction in which MGM Resorts
International or any of its Subsidiaries conducts or proposes to conduct gaming requires that a person who is a holder or the beneficial owner of Notes be licensed, qualified or found suitable under applicable gaming laws, such holder or beneficial
owner, as the case may be, shall apply for a license, qualification or a finding of suitability within the required time period. If such Person fails to apply or become licensed or qualified or is found unsuitable, MGM Resorts International shall
have the right, at its option:
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to require such Person to dispose of its Notes or beneficial interest therein within 30 days of receipt of notice of MGM Resorts Internationals election or such earlier date as may be requested or
prescribed by such gaming authority; or
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to redeem such Notes, which redemption may be less than 30 days following the notice of redemption if so requested or prescribed by the applicable gaming authority, at a redemption price equal to:
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(a)
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the Persons cost, plus accrued and unpaid interest, if any, to the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; and
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(b)
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100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; or
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(2)
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such other amount as may be required by applicable law or order of the applicable gaming authority.
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MGM Resorts International shall notify the trustee in writing of any such redemption as soon as practicable. MGM Resorts International shall
not be responsible for any costs or expenses any holder of Notes may incur in connection with its application for a license, qualification or a finding of suitability.
Additional Covenants of MGM Resorts International
Limitation on Liens
Other
than as provided below under Exempted Liens and Sale and Lease-Back Transactions, neither MGM Resorts International nor any of the Subsidiary Guarantors may issue, assume or guarantee any Indebtedness secured by a Lien upon any
Principal Property or on any evidences of Indebtedness or shares of capital stock of, or other ownership interests in, any Subsidiaries that own any Principal Property (regardless of whether the Principal Property, Indebtedness, capital stock or
ownership interests were acquired before or after the date of the Indenture) without effectively providing that the Notes shall be secured equally and ratably with (or prior to) such Indebtedness so long as such Indebtedness shall be so secured,
except that this restriction will not apply to:
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(a)
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Liens existing on the Issue Date;
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(b)
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Liens affecting property of a corporation or other entity existing at the time it becomes a Subsidiary Guarantor or at the time it is merged into or consolidated with MGM Resorts International or a Subsidiary Guarantor
(provided that such Liens do not extend to or cover property of MGM Resorts International or any Subsidiary Guarantor other than property of the entity so acquired or which becomes a Subsidiary Guarantor);
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(c)
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Liens (including purchase money Liens) existing at the time of acquisition thereof on property acquired after the
date hereof or to secure Indebtedness Incurred prior to, at the time of, or within
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24 months after the acquisition for the purpose of financing all or part of the purchase price of property acquired after the date hereof (provided that such Liens do not extend to or cover any
property of MGM Resorts International or any Subsidiary Guarantor other than the property so acquired);
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(d)
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Liens on any property to secure all or part of the cost of improvements or construction thereon or Indebtedness Incurred to provide funds for such purpose in a principal amount not exceeding the cost of such
improvements or construction;
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(e)
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Liens which secure Indebtedness of a Subsidiary of MGM Resorts International to MGM Resorts International or to a Subsidiary Guarantor or which secure Indebtedness of MGM Resorts International to a Subsidiary Guarantor;
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(f)
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Liens on the stock, partnership or other equity interest of MGM Resorts International or a Subsidiary Guarantor in any Joint Venture or any Subsidiary that owns an equity interest in such Joint Venture to secure
Indebtedness, provided the amount of such Indebtedness is contributed and/or advanced solely to such Joint Venture;
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(g)
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Liens to government entities, including pollution control or industrial revenue bond financing;
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(h)
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Liens required by any contract or statute in order to permit MGM Resorts International or a Subsidiary of MGM Resorts International to perform any contract or subcontract made by it with or at the request of a
governmental entity;
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(i)
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mechanics, materialmans, carriers or other like Liens, arising in the ordinary course of business;
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(j)
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Liens for taxes or assessments and similar charges;
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(k)
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zoning restrictions, easements, licenses, covenants, reservations, restrictions on the use of real property and certain other minor irregularities of title;
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(l)
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Liens on any short-term or interim Indebtedness intended to be assumed by MGP or one of its Subsidiaries in connection with an acquisition by MGP or one of its Subsidiaries of the property securing such Indebtedness,
provided that such Indebtedness is assumed by MGP or one of its Subsidiaries within fifteen (15) days of its initial incurrence by MGM Resorts International or a Subsidiary Guarantor; and
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(m)
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any extension, renewal, replacement or refinancing of any Indebtedness secured by a Lien permitted by any of the foregoing clauses (a) through (l) (
provided
that, in the case of clause (l), any extension,
renewal, replacement or refinancing of any Indebtedness referred to in clause (l) is assumed by MGP or one of its Subsidiaries as set forth therein).
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Notwithstanding the foregoing,
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(a)
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if any of the Existing Senior Notes are hereafter secured by any Liens on any of the assets of MGM Resorts International or any Subsidiary Guarantor (the Initial Liens), then MGM Resorts International and
each Subsidiary Guarantor shall, substantially concurrently with the granting of any such Liens, subject to all necessary gaming regulatory approvals, grant perfected Liens in the same collateral to secure the Notes, equally, ratably and on a pari
passu basis (the Pari Passu Liens). The Pari Passu Liens granted pursuant to this provision shall be (i) granted concurrently with the granting of any such Initial Liens, and (ii) granted pursuant to instruments, documents and
agreements which are no less favorable to the trustee and the holders of the Notes than those granted to secure the Existing Senior Notes. In connection with the granting of any such Pari Passu Liens, MGM Resorts International and each Subsidiary
Guarantor shall provide to the trustee (y) policies of title insurance on customary terms and conditions, to the extent that policies of title insurance on the corresponding property are provided to the holders of the Existing Senior Notes or
their trustee (and in an insured amount that bears the same proportion to the principal amount of the outstanding Notes as the insured amount in the policies provided to the holders of the Existing Senior Notes bears to the aggregate outstanding
amount thereof), and (z) legal opinions and other assurances as the trustee may reasonably request; and
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(b)
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if MGM Resorts International and the Subsidiary Guarantors become entitled to the release of all of such Initial Liens securing the Existing Senior Notes and Subsidiary guarantees related thereto, and provided that no
default or event of default has then occurred and remains continuing, MGM Resorts International and the Subsidiary Guarantors may in their sole discretion request that the collateral agent release any such Initial Liens securing the Notes and the
Existing Senior Notes, and in such circumstances the collateral agent shall so release such Initial Liens.
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Limitation on
Sale and Lease-Back Transactions
Other than as provided below under Exempted Liens and Sale and Lease-Back
Transactions, neither MGM Resorts International nor any Subsidiary Guarantor will enter into any Sale and Lease-Back Transaction unless either:
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(i)
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MGM Resorts International or such Subsidiary Guarantor would be entitled, pursuant to the provisions described in clauses (a) through (m) under Limitation on Liens above, to create, assume or
suffer to exist a Lien on the property to be leased without equally and ratably securing the Notes; or
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(ii)
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an amount equal to the greater of the net cash proceeds of such sale or the fair market value of such property (in the good faith opinion of an officer of MGM Resorts International) is applied within 120 days to the
retirement or other discharge of its Funded Debt.
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Exempted Liens and Sale and Lease-Back Transactions
Notwithstanding the restrictions set forth in Limitation on Liens and Limitation on Sale and
Lease-Back
Transactions above, MGM Resorts International or any Subsidiary Guarantor may create, assume or suffer to exist Liens or enter into Sale and Lease-Back Transactions not otherwise permitted as
described above, provided that at the time of such event, and after giving effect thereto, the sum of outstanding Indebtedness secured by such Liens (not including Liens permitted under Limitation on Liens above) plus all
Attributable Debt in respect of such Sale and Lease-Back Transactions entered into (not including Sale and Lease-Back Transactions permitted under Limitation on Sale and Lease-Back Transactions above), measured, in each case, at
the time any such Lien is incurred or any such Sale and Lease-Back Transaction is entered into, by MGM Resorts International and the Subsidiary Guarantors does not exceed 15% of Consolidated Net Tangible Assets and Liens securing Indebtedness
in excess of such amount to the extent such Lien is incurred in connection with an extension, renewal, replacement or refinancing of Indebtedness (not to exceed the principal amount of such extended, renewed, replaced or refinanced Indebtedness plus
fees, expenses and premium payable thereon) secured by a Lien incurred pursuant to the provisions of this Exempted Liens and Sale Leaseback Transactions paragraph or any previous extension, renewal, replacement or refinancing of any such
Indebtedness (which extended, renewed, replaced or refinanced Indebtedness shall, for the avoidance of doubt, thereafter be included in the calculation of such amount), provided that the foregoing shall not apply to any Liens that may at any time
secure any of the Existing Senior Notes.
Merger, Consolidation or Sale of Assets
The Indenture does not allow us to consolidate or merge with or into, or sell, assign, convey, transfer or lease our properties and assets,
substantially in their entirety, as computed on a consolidated basis, to another corporation, person or entity unless:
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either we are the surviving person, in the case of a merger or consolidation, or the successor or transferee is a corporation organized under the laws of the United States, or any state thereof or the District of
Columbia and the successor or transferee corporation expressly assumes, by supplemental indenture, all of our obligations under the Indenture, including under the Notes; and
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no default or event of default exists immediately after such transaction.
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Subsidiary Guarantees
The Indenture will provide that any of our existing and future domestic Subsidiaries that are wholly owned, directly or indirectly, by us will
be required to become a Subsidiary Guarantor if such Subsidiary grants a guarantee in respect of any Reference Indebtedness as described under Subsidiary Guarantees above.
Events of Default
Events
of default means any of the following:
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1)
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default in the payment of any interest upon any Notes when it becomes due and payable, and continuance of such default for a period of 30 days;
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2)
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default in the payment of principal of or premium, if any, on any Notes when due;
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3)
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the acceleration of the maturity of any Indebtedness of MGM Resorts International or any Subsidiary Guarantor (other than
Non-recourse
Indebtedness), at any one time, in an amount
in excess of the greater of (a) $250 million and (b) 5% of Consolidated Net Tangible Assets, if such acceleration is not annulled within 30 days after written notice as provided in the Indenture;
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4)
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entry of final judgments against MGM Resorts International or any Subsidiary Guarantor which remain undischarged for a period of 60 days, provided that the aggregate of all such judgments exceeds $250 million and
judgments exceeding $250 million remain undischarged for 60 days after notice as provided in the Indenture;
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5)
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default in the performance, or breach, of any covenants or warranties in the Indenture if the default continues uncured for a period of 60 days after written notice to us by the trustee or to us and the trustee by the
holders of at least 25% in principal amount of the outstanding Notes as provided in the Indenture; and
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6)
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certain events of bankruptcy, insolvency or reorganization.
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The failure to redeem any Notes
subject to a conditional redemption is not an event of default if any event on which such redemption is so conditioned does not occur before the redemption date
If an event of default occurs and continues, then the trustee or the holders of not less than 25% in principal amount of the outstanding
Notes may, by a notice in writing to us, and to the trustee if given by the holders, declare to be due and payable immediately the principal of the outstanding Notes.
At any time after a declaration of acceleration with respect to Notes has been made, but before a judgment or decree for payment of the money
due has been obtained by the trustee, the holders of a majority in principal amount of the outstanding Notes may, subject to our having paid or deposited with the trustee a sum sufficient to pay overdue interest and principal which has become due
other than by acceleration and certain other conditions, rescind and annul such acceleration if all events of default, other than the nonpayment of accelerated principal and premium, if any, with respect to the Notes have been cured or waived as
provided in the Indenture. For information as to waiver of defaults see the discussion set forth below under Modification and Waiver.
The Indenture provides that the trustee is not obligated to exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless the trustee receives indemnity satisfactory to it against any loss, liability or expense. Subject to certain rights of the trustee and applicable law, the holders of a majority in principal amount of the outstanding Notes
shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to such Notes.
No holder of any Notes will have any right to institute any proceeding, judicial or otherwise with respect to the Indenture or for the
appointment of a receiver or trustee, or for any remedy under the Indenture, unless such
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holder shall have previously given to the trustee written notice of a continuing event of default with respect to the Notes and the holders of at least 25% in principal amount of the
outstanding Notes shall have made written request and offered reasonable indemnity to the trustee to institute such proceeding as trustee, and the trustee shall not have received from the holders of a majority in principal amount of the outstanding
Notes direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, the holder of any Notes will have an absolute and unconditional right to receive payment of the principal of,
premium, if any, and any interest on such Notes on or after the due dates expressed in such Notes and to institute suit for the enforcement of any such payment.
We are required by the Indenture, within 120 days after the end of each fiscal year, to furnish to the trustee a statement as to
compliance with the Indenture. The Indenture provides that the trustee may withhold notice to the holders of Notes of any default or event of default (except a default in payment on Notes) with respect to Notes if and so long as a committee of its
trust officers, in good faith, determines that withholding such notice is in the interest of the holders of Notes.
Notwithstanding clause
(5) of the first paragraph above or any other provision of the Indenture, except as provided in the final sentence of this paragraph, the sole remedy for any failure to comply by MGM Resorts International with the requirements described under
the caption Reports below shall be the payment of liquidated damages as described in the following sentence, such failure to comply shall not constitute an Event of Default, and holders of the Notes shall not have any right under
the Indenture or the Notes to accelerate the maturity of the Notes as a result of any such failure to comply. If a failure to comply by MGM Resorts International with the covenant described under the caption Reports below
continues for 60 days after MGM Resorts International receives notice of such failure to comply in accordance with clause (5) of the first paragraph above (such notice, the Reports Default Notice), and is continuing on the 60th day
following MGM Resorts Internationals receipt of the Reports Default Notice, MG Resorts International will pay liquidated damages to all holders of Notes at a rate per annum equal to 0.25% of the principal amount of the Notes from the 60th day
following MGM Resorts Internationals receipt of the Reports Default Notice to but not including the earlier of (x) the 121st day following MGM Resorts Internationals receipt of the Reports Default Notice and (y) the date on
which the failure to comply by MGM Resorts International with the requirements described under the caption Reports below shall have been cured or waived. On the earlier of the date specified in the immediately preceding clauses
(x) and (y), such liquidated damages will cease to accrue. If the failure to comply by MGM Resorts International with the requirements described under the caption Reports below shall not have been cured or waived on or
before the 121st day following MGM Resorts Internationals receipt of the Reports Default Notice, then the failure to comply by MGM Resorts International with the requirements described under the caption Reports shall on
such 121st day constitute an Event of Default. A failure to comply with the requirements described under the caption Reports below automatically shall cease to be continuing and shall be deemed cured at such time as MGM Resorts
International furnishes to the trustee the applicable information or report (it being understood that the availability of such information or report on the Commissions EDGAR service (or any successor thereto) shall be deemed to satisfy MGM
Resorts Internationals obligation to furnish such information or report to the trustee).
Modification and Waiver
We and the trustee, at any time and from time to time, may modify the Indenture without prior notice to or consent of any holder of the Notes
for any of the following purposes:
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to permit a successor corporation to assume our covenants and obligations under the Indenture and in the Notes in accordance with the terms of the Indenture;
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to add to our covenants for the benefit of the holders of the Notes;
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to surrender any of our rights or powers conferred in the Indenture;
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to add any additional events of default;
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to supplement any of the provisions of the Indenture to the extent needed to permit or facilitate the defeasance and discharge of the Notes in a manner that will not adversely affect the interests of the holders of the
Notes in any material respect;
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to provide for the acceptance of appointment by a successor trustee and to add to or change any of the provisions of the Indenture as is necessary to provide for the administration of the trust by more than one trustee;
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to comply with the requirements of the Commission in connection with qualification of the Indenture under the TIA;
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to correct or supplement any provision in the Indenture which may be defective or inconsistent with any other provision in the Indenture;
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to conform the text of the Indenture or the Notes to the Description of Notes set forth in this prospectus supplement to the extent that such provision in the Description of Notes was intended to be a
verbatim, or substantially verbatim, recitation of a provision of the Indenture or the Notes;
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to eliminate any conflict between the terms of the Indenture and the Notes and the TIA; or
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to make any other provisions with respect to matters or questions arising under the Indenture which will not be inconsistent with any provision of the Indenture as long as the new provisions do not adversely affect in
any material respect the interests of the holders of the Notes.
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We may also modify the Indenture for any other purpose if
we receive the written consent of the holders of not less than a majority in principal amount of the outstanding Notes. We may not, however, without the consent of the holder of each Note effected thereby:
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change the stated maturity or reduce the principal amount or the rate of interest, or extend the time for payment of interest of the Notes or any premium payable upon the redemption of the Notes, or impair the right to
institute suit for the enforcement of any payment on or after the due date thereof (including, in the case of redemption, on or after the redemption date), or alter any redemption provisions in a manner adverse to the holders of the Notes or release
any Subsidiary Guarantor under any Subsidiary Guarantee (except in accordance with the terms of the Indenture or the Subsidiary Guarantee) or collateral, if any, securing the Notes (except in accordance with the terms of the Indenture or the
documents governing such collateral, if any);
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reduce the percentage in principal amount of the Notes where the consent of the holder is required for any such amendment, supplemental indenture or waiver which is provided for in the Indenture; or
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modify any of the waiver provisions, except to increase any required percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each
outstanding Note which would be affected.
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The Indenture provides that the holders of not less than a majority in aggregate
principal amount of the Notes, by notice to the trustee, may on behalf of the holders of the Notes waive any default and its consequences under the Indenture, except (1) a continuing default in the payment of interest on, premium, if any, or
the principal of, any Note held by a nonconsenting holder or (2) a default in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the holder of each Note.
Defeasance of Notes or Certain Covenants in Certain Circumstances
Legal Defeasance and Discharge
. The Indenture provides that we may be discharged from any and all obligations under the Notes other
than:
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certain obligations to pay additional amounts, if any, upon the occurrence of certain tax, assessment or governmental charge events regarding payments on the Notes;
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to register the transfer or exchange of the Notes;
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to replace stolen, lost or mutilated Notes; or
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to maintain paying agencies and to hold money for payment in trust.
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We may only defease and
discharge all of our obligations under the Notes if:
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we irrevocably deposit with the trustee, in trust, the amount, as certified by an officers certificate, of money and/or U.S. government obligations that, through the payment of interest and principal in
respect thereof in accordance with their terms, will be sufficient to pay and discharge each installment of principal and premium, if any and any interest on, and any mandatory sinking fund payments in respect of, the Notes on the dates such
payments are due; and
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With respect to legal defeasance only, we deliver to the trustee an opinion of independent counsel (which opinion must refer to and be based upon a published ruling of the United States Internal Revenue Service or a
change in applicable United States federal income tax laws) or a ruling directed to the Trustee from the United States Internal Revenue Service, in either case to the effect that holders of the Notes will not recognize income, gain or loss for
United States federal income tax purposes as a result of such deposit, defeasance and discharge.
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Defeasance of Certain
Covenants
. Upon compliance with certain conditions, we may omit to comply with certain restrictive covenants contained in the Indenture. Any omission to comply with our obligations or covenants shall not constitute a default or event of default
with respect to any Notes. In that event, you would lose the protection of these covenants, but would gain the protection of having money and/or U.S. government obligations set aside in trust to repay the Notes. We may only defease any
covenants if, among other requirements:
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we deposit with the trustee money and/or U.S. government obligations that, through the payment of interest and principal in respect to such obligations, in accordance with their terms, will provide money in an
amount, as certified by an officers certificate, sufficient to pay principal, premium, if any, and any interest on and any mandatory sinking fund payments in respect of the Notes on the dates such payments are due; and
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we deliver to the trustee an opinion of counsel or a ruling from the United States Internal Revenue Service to the effect that the holders of the Notes will not recognize income, gain or loss, for United States federal
income tax purposes, as a result of the covenant defeasance.
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Limited Liability of Certain Persons
The Indenture provides that none of our past, present or future stockholders, incorporators, employees, officers or directors, or of any
successor corporation or any of our affiliates shall have any personal liability in respect of our obligations under the Indenture or the Notes by reason of his, her or its status as such stockholder, incorporator, employee, officer or director.
Compliance with Gaming Laws
Each
holder of a Note, by accepting any Note, agrees to be bound by the requirements imposed on holders of debt securities of MGM Resorts International by the gaming authority of any jurisdiction in which MGM Resorts International or any of its
Subsidiaries conducts or proposes to conduct gaming activities. For a description of the regulatory requirements applicable to MGM Resorts International, see Regulation and Licensing herein.
Reports
Whether or not required by the
Commission, so long as any Notes are outstanding, MGM Resorts International will furnish to the trustee, within 15 days after the time periods specified in the Commissions rules
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and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on
Forms 10-Q
and 10-K,
including a Managements Discussion and Analysis of Financial Condition and Results of Operations and, with respect to
the annual information only, a report on the annual financial statements by MGM Resorts Internationals certified independent accountants; and (2) all current reports that would be required to be filed with the Commission on
Form 8-K
(it being understood that the availability of such information or report on the Commissions EDGAR service (or any successor thereto) shall be deemed to satisfy MGM Resorts Internationals
obligation to furnish the information or report referenced in clauses (1) and (2) to the trustee). In addition, whether or not required by the Commission, MGM Resorts International will file a copy of all of the information and reports referred
to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commissions rules and regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon request.
Concerning the Trustee
If the trustee becomes a creditor of MGM Resorts International, the Indenture limits its right to obtain payment of claims in certain cases, or
to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.
The holders of a majority in aggregate principal
amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The Indenture provides that in case an
Event of Default shall occur and be continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the request of any holder of such Notes, unless such holder shall have offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense.
Book-Entry; Delivery and Form
DTC,
which we refer to along with its successors in this capacity as the depositary, will act as securities depositary for the Notes. The Notes will be issued as fully registered securities registered in the name of Cede & Co., the
depositarys nominee. One or more fully registered global security certificates, representing the total aggregate principal amount of each series of Notes, will be issued and will be deposited with the depositary or its custodian and will bear
a legend regarding the restrictions on exchanges and registration of transfer referred to below.
Investors may elect to hold beneficial
interests in the global Notes through either DTC, in the United States, or Clearstream Banking, société anonyme (Clearstream), or Euroclear Bank S.A./N.V (Euroclear), in Europe, if they are participants of such
systems, or indirectly through organizations that are participants in such systems. Clearstream and Euroclear will hold interests on behalf of their participants through customers securities accounts in Clearstreams and Euroclears
names on the books of their respective depositaries, which in turn will hold such interests in customers securities accounts in the depositaries names on the books of DTC.
DTC has advised us that it is a limited-purpose trust company organized under the New York Banking Law, a banking organization
within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that its participants (Direct Participants) deposit with DTC and facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts, thereby eliminating the
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need for physical movement of securities certificates. Direct Participants include both U.S. and
non-U.S. securities
brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (DTCC). DTCC is the holding company for DTC, National Securities Clearing
Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and
non-U.S. securities
brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly. The
DTC rules applicable to its participants are on file with the Commission.
Clearstream advises that it is incorporated under the laws of
Luxembourg as a professional depositary. Clearstream holds securities for its participating organizations (Clearstream Participants) and facilitates the clearance and settlement of securities transactions between Clearstream Participants
through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to Clearstream Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a registered bank in Luxembourg, Clearstream is subject to
regulation by the Luxembourg Commission for the Supervision of the Financial Sector (Commission de Surveillance du Secteur Financier). Clearstream Participants are recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, and may include the underwriters. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Clearstream Participant, either directly or indirectly.
Distributions with respect to interests in the Notes held beneficially through Clearstream will be credited to cash accounts of Clearstream
Participants in accordance with its rules and procedures.
Euroclear advises that it was created in 1968 to hold securities for
participants of Euroclear (Euroclear Participants) and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear includes various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries.
Euroclear is operated by Euroclear Bank S.A./N.V. (the Euroclear Operator). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries, and may include the underwriters. Indirect access to Euroclear is also available to
other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of Euroclear, and applicable Belgian law (collectively, the Terms and Conditions). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no records of or relationship with persons holding through Euroclear Participants.
Distributions with respect to the Notes held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants in
accordance with the Terms and Conditions.
We will issue Notes in definitive certificated form in exchange for beneficial interests in the
applicable global security certificates if the depositary notifies us that it is unwilling or unable to continue as depositary for
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the Notes, the depositary ceases to maintain certain qualifications under the Exchange Act and a successor depositary is not appointed by us within 90 days, or we determine, in our sole
discretion, that the global security certificates shall be exchangeable. If we determine at any time that the Notes shall no longer be represented by global security certificates, we will inform the depositary of such determination who will, in
turn, notify participants of their right to withdraw their beneficial interest from the global security certificates, and if such participants elect to withdraw their beneficial interests, we will issue certificates in definitive form in exchange
for such beneficial interests in the global security certificates. Any global Note, or portion thereof, that is exchangeable pursuant to this paragraph will be exchangeable for security certificates, as the case may be, registered in the names
directed by the depositary. We expect that these instructions will be based upon directions received by the depositary from its participants with respect to ownership of beneficial interests in the global security certificates.
As long as the depositary or its nominee is the registered owner of the global security certificates, the depositary or its nominee, as the
case may be, will be considered the sole owner and holder of the global security certificates and all Notes represented by these certificates for all purposes under the indenture. Except in the limited circumstances referred to above, owners of
beneficial interests in global security certificates:
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will not be entitled to have the Notes represented by these global security certificates registered in their names, and
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will not be considered to be owners or holders of the global security certificates or any Notes represented by these certificates or have any rights for any purpose under the Notes or the indenture.
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All payments on the Notes represented by global security certificates and all transfers and deliveries of related Notes will be made to the
depositary or its nominee, as the case may be, as the holder of such securities.
Ownership of beneficial interests in the global security
certificates will be limited to participants or persons that may hold beneficial interests through institutions that have accounts with the depositary or its nominee. Ownership of beneficial interests in global security certificates will be shown
only on, and the transfer of those ownership interests will be effected only through, records maintained by the depositary or its nominee, with respect to participants interests, or any participant, with respect to interests of persons held by
the participant on their behalf. Payments, transfers, deliveries, exchanges and other matters relating to beneficial interests in global security certificates may be subject to various policies and procedures adopted by the depositary from time to
time. Neither we nor the trustee will have any responsibility or liability for any aspect of the depositarys or any participants records relating to, or for payments made on account of, beneficial interests in global security
certificates, or for maintaining, supervising or reviewing any of the depositarys records or any participants records relating to these beneficial ownership interests.
Although the depositary has agreed to the foregoing procedures in order to facilitate transfers of interests in the global security
certificates among participants, the depositary is under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. We will not have any responsibility for the performance by the
depositary or its direct participants or indirect participants under the rules and procedures governing the depositary.
The information
in this section concerning the depositary, its book-entry system, Clearstream and Euroclear has been obtained from sources that we believe to be reliable, but we have not attempted to verify the accuracy of this information.
Global Clearance and Settlement Procedures
Initial settlement for the Notes will be made in immediately available funds. Secondary market trading between DTC Participants will occur in
the ordinary way in accordance with DTC rules and will be settled in immediately available funds using DTCs
Same-Day
Funds Settlement System. Secondary market trading
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between Clearstream Participants and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear, as
applicable.
Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or
indirectly through Clearstream Participants or Euroclear Participants, on the other, will be effected through DTC in accordance with DTC rules; however, such cross-market transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time).
Because of time-zone differences, credits of the Notes received in Clearstream or Euroclear as a result of a transaction with a DTC
Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Such credits or any transactions in such Notes settled during such processing will be reported to the relevant
Euroclear Participant or Clearstream Participant on such business day. Cash received in Clearstream or Euroclear as a result of sales of the Notes by or through a Clearstream Participant or a Euroclear Participant to a DTC Participant will be
received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Notes among participants
of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued or changed at any time.
Paying Agent and Registrar for the Notes
MGM Resorts International will maintain one or more paying agents for the Notes in the Borough of Manhattan, City of New York. The initial
paying agent for the Notes will be the Trustee.
MGM Resorts International will also maintain a registrar with offices in the Borough of
Manhattan, City of New York. The initial registrar will be the Trustee. The registrar will maintain a register reflecting ownership of the Notes outstanding from time to time and will make payments on and facilitate transfers of Notes on behalf of
MGM Resorts International.
MGM Resorts International may change the paying agents or the registrars without prior notice to the holders
of the Notes. MGM Resorts International or any of its Subsidiaries may act as a paying agent or registrar.
Governing Law
The Indenture will be governed by New York law.
Certain Definitions
Set forth below are
certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.
Attributable Debt
with respect to any Sale and Lease-Back Transaction that is subject to the restrictions described under
Additional Covenants of MGM Resorts InternationalLimitation on Sale and Lease-Back Transactions means the present value of the minimum rental payments called for during the terms of the lease (including any period for which
such lease has been extended), determined in accordance with generally accepted accounting principles, discounted at a rate that, at the inception of the lease, the lessee would have incurred to borrow over a similar term the funds necessary to
purchase the leased assets.
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Consolidated Net Tangible Assets
means the total amount of assets
(including investments in Joint Ventures) of MGM Resorts International and its Subsidiaries (less applicable depreciation, amortization and other valuation reserves) after deducting therefrom (a) all current liabilities of MGM Resorts
International and its Subsidiaries (excluding (i) the current portion of long-term Indebtedness, (ii) intercompany liabilities and (iii) any liabilities which are by their terms renewable or extendible at the option of the obligor
thereon to a time more than 12 months from the time as of which the amount thereof is being computed) and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and any other like intangibles of MGM
Resorts International and its Subsidiaries, all as set forth on the consolidated balance sheet of MGM Resorts International for the most recently completed fiscal quarter for which financial statements are available and computed in accordance with
generally accepted accounting principles.
Credit Facility
means the Amended and Restated Credit Agreement, dated as of
April 25, 2016, among MGM Resorts International, the lenders and letters of credit issuers party thereto and Bank of America, N.A., as administrative agent, as such agreement may be amended, supplemented, waived or otherwise modified from time
to time or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part).
Elgin Sub
means MGM Elgin Sub, Inc., a Nevada corporation.
Existing Senior Notes
means (i) MGM Resorts Internationals 8.625% senior notes due 2019, (ii) MGM
Resorts Internationals 5.250% senior notes due 2020, (iii) MGM Resorts Internationals 6.750% senior notes due 2020, (iv) MGM Resorts Internationals 6.625% senior notes due 2021, (v) MGM
Resorts Internationals 7.75% senior notes due 2022, (vi) MGM Resorts Internationals 6% notes due 2023, (vii) MGM Resorts Internationals 4.625% senior notes due 2026 and (viii) the Mandalay Notes.
Funded Debt
means all Indebtedness of MGM Resorts International or any Subsidiary Guarantor which (i) matures by
its terms on, or is renewable at the option of any obligor thereon to, a date more than one year after the date of original issuance of such Indebtedness and (ii) ranks at least pari passu with the Notes or the applicable Subsidiary Guarantee.
Gaming Authority
means any governmental agency, authority, board, bureau, commission, department, office or
instrumentality with regulatory, licensing or permitting authority or jurisdiction over any gaming business or enterprise or any Gaming Facility or with regulatory, licensing or permitting authority or jurisdiction over any gaming operation (or
proposed gaming operation) owned, managed or operated by the Issuer or the Subsidiary Guarantors.
Gaming Facility
means any casino, hotel, resort, race track,
off-track
wagering site, venue at which gaming or wagering is conducted, and all related or ancillary property and assets.
Incur
means, with respect to any Indebtedness, to incur, create, issue, assume, guarantee or otherwise become liable for or
with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness; provided that the accrual of interest shall not be considered an Incurrence of Indebtedness.
Indebtedness
of any Person means (i) any indebtedness of such Person, contingent or otherwise, in respect of borrowed
money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by notes, bonds, debentures or similar instruments or letters of credit, or representing the balance deferred
and unpaid of the purchase price of any property, including any such indebtedness Incurred in connection with the acquisition by such Person or any of its Subsidiaries of any other business or entity, if and to the extent such indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance with generally accepted accounting principles, including for such purpose obligations under capital leases and (ii) any guarantee, endorsement (other than for
collection or deposit in the ordinary course of business), discount with recourse, or any agreement (contingent or otherwise) to purchase,
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repurchase or otherwise acquire or to supply or advance funds with respect to, or to become liable with respect to (directly or indirectly) any indebtedness of any Person, but shall not include
indebtedness or amounts owed for compensation to employees, or for goods or materials purchased, or services utilized, in the ordinary course of business of such Person. For purposes of this definition of Indebtedness, a capitalized
lease shall be deemed to mean a lease of real or personal property which, in accordance with generally accepted accounting principles, is required to be capitalized.
Insurance Subsidiaries
means MGMM Insurance Company and any other Subsidiaries established from time to time by us or our
Subsidiaries for the primary purpose of insuring the business, facilities and/or employees of MGM Resorts International and its Subsidiaries.
Issue Date
means the date on which the Notes offered hereby are issued.
Joint Venture
means any partnership, corporation or other entity, in which up to and including 50% of the partnership
interests, outstanding voting stock or other equity interests is owned, directly or indirectly, by MGM Resorts International and/or one or more of its Subsidiaries.
Lien
means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance or
lien of any kind, whether voluntarily incurred or arising by operation of law or otherwise, affecting any property, including any agreement to grant any of the foregoing, any conditional sale or other title retention agreement, any lease in the
nature of a security interest, and/or the filing of or agreement to give any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the Universal
Commercial Code as in effect in the State of New York or comparable law of any jurisdiction with respect to any property; provided that in no event shall an operating lease be deemed to constitute a Lien.
Mandalay Notes
means Mandalay Resort Groups 7.0% Debentures due 2036.
MDDC
means Marina District Development Company, LLC, a New Jersey limited liability company.
MDDHC
means Marina District Development Holding Co., LLC, a New Jersey limited liability company.
MGP
means MGM Growth Properties LLC, a Delaware limited liability company, and its successors.
Non-recourse
Indebtedness
means Indebtedness the terms of which provide that the
lenders claim for repayment of such Indebtedness is limited solely to a claim against the property which secures such Indebtedness.
Obligations
means any principal, interest, premium, if any, penalties, fees, indemnifications, reimbursements, expenses,
damages or other liabilities or amounts payable under the documentation governing or otherwise in respect of any Indebtedness.
Person
means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock
company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof or any other entity.
Principal Property
means any real estate or other physical facility or depreciable asset the net book value of which on the
date of determination exceeds the greater of $250 million and 2% of Consolidated Net Tangible Assets.
Sale and
Lease-Back Transaction
means any arrangement with a person (other than MGM Resorts International or any of its Subsidiaries), or to which any such person is a party, providing for the leasing to MGM
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Resorts International or any of its Subsidiaries for a period of more than three years of any Principal Property, which has been or is to be sold or transferred by MGM Resorts International or
any of its Subsidiaries to such person, or to any other person (other than MGM Resorts International of any of its Subsidiaries) to which funds have been or are to be advanced by such person on the security of the leased property.
Subsidiary
of any specified Person means any corporation, partnership or limited liability company of which at least a
majority of the outstanding stock (or other equity interests) having by the terms thereof ordinary voting power for the election of directors (or the equivalent) of such Person (irrespective of whether or not at the time stock (or other equity
interests) of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by such Person, or by one or more other Subsidiaries, or by such
Person and one or more other Subsidiaries.
Treasury Securities
mean any obligations issued or guaranteed by the United
States government or any agency thereof.
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