00:00Let's bring in his colleague Jody Lurie. She's a senior credit analyst covering another story. Barry Dillard's firm People has
00:06made an offer for the portion of MGM resorts that he doesn't already own. The proposal here is for 4830
00:12a share. The remaining 74 percent of the company that he doesn't already own and that values the company at
00:1718.8 billion dollars. So we bring this to you Jody because you are a credit analyst and there's going
00:23to be a lot of debt involved in this. What's the thinking behind this deal at this time. So I
00:28think what's key here Scarlett
00:29is when you look at the balance sheet you have to remember that they have operating leases and when you
00:34add the operating leases plus the debt you're talking 30 billion already. And then if you add on the roughly
00:398 billion that they're going to need to finance the deal we're talking leverage that goes up to 7.5
00:44times from about six times right now. So that's a large amount for MGM to absorb. But on top of
00:50that we're already starting to hear signs that that's too low of an offer and perhaps if MGM does consider
00:56it they might try to fish for better deals.
00:58Ah okay so there could be some kind of bidding war going on or at least a protracted negotiation. There's
01:03also deal making going on with Caesars. Talk us through how this compares with that deal.
01:08Right so I think that's the key Scarlett is that based on what the price is for Caesars everyone's saying
01:14well if Caesars is worth X then you can imagine that MGM would also be worth that at least.
01:19And so that's where you're seeing that movement. The big challenge for MGM in particular they don't have change of
01:24control on their bonds so all bondholders are going to be affected negatively by it.
01:29Caesars it's likely they will be and it's where the bonds are trading but we're not quite sure. I think
01:35the key for both companies is that if and when these deals happen it's going to change the whole entire
01:43industry and change how it's run.
01:44It's going to be much more aggressive in my opinion and it might not be as focused on bringing down
01:49leverage and keeping these sort of more constructive balance sheets.
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