MotorCity Casino Hotel in Detroit is making provisions in case a second lockdown on the business is imposed. The Ilitch-owned gambling establishment got an approval from the Michigan Gaming Control Board (MGCB) during a special meeting Monday to expand on its revolving credit facility and overall finance model.
MGCB Unanimously Approved the Plan
The casino resort near downtown Detroit received unanimous approval to restructure its debt from the 4 members of the MGCB during the virtual meeting. According to the plan presented to the MGCB by MotorCity president Bruce Dall, the casino operator would move from a $15 million revolving credit facility to a $45 million one.
The credit facility expansion would allow MotorCity to sustain business for at least 18 months in case of a second closure, Bruce Dall outlined as the main motive for the company to increase debt. Besides the tripled credit revolving facility, MotorCity would also seek to restructure its financing.
Currently, the casino company is operating around a financial model of $282 million term loan and $200 million in senior unsecured notes, which would be expanded to $570 million, a combination of 5-year term loan and unsecured debt.
MotorCity is restructuring its financing amid upcoming maturities of its existing debt in the summer of 2021 and in 2022, seeking to close the deal by the end of the week, before any potential market disruption from the presidential election.
Casino Closure Impact
Mid-March the three casinos in Detroit, MotorCity, Greektown and MGM Grand, were ordered to close down to help prevent any further spread of the virus. The land-based gaming establishments were allowed to re-open in early August, albeit implementing a number of health and safety guidelines and with limited capacity at 15%.
At the end of July, MotorCity laid off 2,500 employees, noting it would look to bring at least half of them back when the casino is allowed to re-open. A release by the MGCB showed revenue from the three commercial Detroit casinos in September fell compared to the same month the prior year.
MotorCity’s revenue for the months of August and September was about 63% and 83% of what the casino generated for the respective month in 2019, and October is expected to reach 85% to 90% of October 2019 level, Bruce Dall noted to the MGCB.
The casinos in Detroit lost more than $555 million for the more than 4 months of closure, while the city of Detroit lost $600,000 in gambling tax revenue for each day the commercial casinos were shuttered.
Nationwide, the impact on casino industry incurred a loss in excess of $2 billion in tax revenue for the states, prompting the need for financial aid to the sector.