MGM – CDS 121bps, Base Case iCDS 118bps, Negative Case iCDS 144bps, 2024 5.375% Bond YTW of 4.480%, Intrinsic YTW 2.610%, Ba3 Rating from Moody’s, XO (equivalent to Baa3) rating from Valens, High Refinancing Need

• Cash bond markets are materially overstating credit risk with a YTW of 4.480% relative to an Intrinsic YTW of 2.610%, while CDS markets are accurately stating risk with a CDS of 121bps relative to an Intrinsic CDS of 118bps. Moreover, Moody’s is also overstating MGM’s fundamental credit risk, with their speculative Ba3 rating three notches lower than Valens’ XO (Baa3) rating
• Incentives Dictate Behavior™ analysis highlights mostly positive signals for debt holders. MGM’s compensation framework should focus management on top line growth and margins, which should drive Uniform ROA expansion. Moreover, management members are material owners of MGM equity relative to their annual compensation, indicating they are likely well-aligned with shareholders for long-term value creation. Additionally, they have low change-in-control compensation, indicating they may not be incentivized to pursue a sale or accept a takeover of the firm, limiting event risk