Credit Outlook：Credit Implications Of Current Events

MOODYS.COM 6 JUNE 2016 NEWS & ANALYSIS Corporates 2 » MGM Resort's Acquisition of Outstanding Stake in Borgata and Sale/Leaseback Are Credit Positive » Jazz Pharmaceuticals' Planned Acquisition of Celator Is Credit Negative » Blackboard's Acquisition of Sequoia Is Credit Positive » Coca-Cola FEMSA’s Acquisition of Ades Is Credit Positive » Virgin Australia's Alliance with HNA Aviation Is Credit Positive » PLDT's Planned Acquisition of San Miguel's Telecom Unit Is Credit Negative » Suntory Holdings' Sale of First Kitchen Is Credit Positive » Bridgestone’s Proposed Acquisition of Speedy Is Credit Positive Infrastructure 10 » Exelon to Proceed with Credit-Negative Plan to Shutter Nuclear Facilities in Illinois » Landis' Equity Stake Sale Would Be Credit Positive » China's Renewable Energy Quota Will Ease Curtailment in Wind and Solar Power Sector Banks 16 » US Community Banks' Increasing Commercial Real Estate Concentration Is Credit Negative » Federal Reserve's Plan to Strengthen Stress Tests for Largest US Banks Is Credit Positive » TBC Bank's Planned Premium London Stock Exchange Listing Is Credit Positive » Investec plc Share Placement Improves Quality of Capital, a Credit Positive » Vietnam's Tighter Bank Liquidity and Lending Rules Are Credit Positive Insurers 25 » Suramericana's Acquisition of RSA Mexico Is Credit Positive Sovereigns 26 » Japan's Consumption Tax Delay Makes Fiscal Goals More Challenging US Public Finance 28 » Housing Finance Agencies See HUD Position on Down Payment Assistance as Credit Positive » Chicago's Delayed Pension Funding Is Credit Negative » Montgomery County, Maryland Property Tax Increase Is Credit Positive RECENTLY IN CREDIT OUTLOOK » Articles in Last Monday’s Credit Outlook 34 » Go to Last Monday’s Credit Outlook Click here for Weekly Market Outlook, our sister publication containing Moody’s Analytics’ review of market activity, financial predictions, and the dates of upcoming economic releases. NEWS & ANALYSIS Credit implications of current events 2 MOODY’S CREDIT OUTLOOK 6 JUNE 2016 Corporates MGM Resort’s Acquisition of Outstanding Stake in Borgata and Sale/Leaseback Are Credit Positive Last Tuesday, MGM Resorts International (Ba3 stable) said that it is buying Boyd Gaming Corporation’s (B2 stable) 50% interest in the Atlantic City, New Jersey-based Borgata Hotel Casino & Spa for $900 million. Combined with the 50% stake MGM already owns, MGM will gain full control of the Borgata. The purchase multiple is about 8.5x Borgata’s trailing 12-month EBITDA of $212 million, which is in line with other gaming acquisitions. MGM also said it reached an agreement with MGM Growth Properties LLC (MGP, B1 stable) for MGP to buy Borgata’s real property from MGM and then lease it back to an MGM subsidiary that will operate the property. The deals are credit positive for MGM because owning 100% of Borgata will add about $112 million in annual EBITDA, net of the rental payment to MGP. MGM’s operational control of this east coast property will also complement its National Harbor and Springfield, Massachusetts developments and simplify MGM’s corporate structure. MGM, which is the largest casino operator on the Las Vegas strip, will finance the acquisition with cash on hand and a bridge loan that will be repaid from the consideration received from MGP. We expect the transactions, which are due to close in the third quarter, will be leverage neutral to MGM. However, MGM’s excess cash balance will be reduced because it will receive operating partnership units for a portion of the real property purchase, as opposed to cash. Borgata’s operations will be fully consolidated into MGM results. Separate from this transaction, we continue to estimate that MGM’s adjusted debt/EBITDA will decline to approximately 6.0x by year-end 2016 and 4.8x by year-end 2017. MGM will pay about $600 million for Boyd’s 50% interest and will assume Borgata’s approximate $600 million of debt. MGP will purchase the real property from MGM for a total consideration of approximately $1.175 billion. MGP will finance the purchase from MGM using cash on hand, revolver drawings and issuance of operating partnership units in MGP. As a result, MGM’s ownership of MGP will increase to 76% from about 73%. Borgata will be added to the existing master lease between MGM and MGP with initial rent due to MGP of $100 million. Peggy Holloway Senior Vice President +1.212.553.4542 margaret.holloway@moodys.com This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. NEWS & ANALYSIS Credit implications of current events 3 MOODY’S CREDIT OUTLOOK 6 JUNE 2016 Jazz Pharmaceuticals’ Planned Acquisition of Celator Is Credit Negative Last Tuesday, Jazz Pharmaceuticals plc (unrated), which issues debt through its Jazz S