With the looming threat of another government-ordered COVID-19 shutdown, the Michigan Gaming Control Board approved a financial restructuring deal for the MotorCity Casino Hotel, according to a Crain’s Detroit Business report.
Under the new arrangement, MotorCity would move to a $45 million line of revolving credit — up from $15 million — allowing the business to weather another season of lost income should the coronavirus cause another temporary closure of the casino.
The decision was made last week in a special meeting of the MGCB, with all four board members voting unanimously to approve the deal.
“If there were a second closure, we could last over 18 months,” Bruce Dall, the president of MotorCity, said during the meeting, according to Crain’s. “Quite frankly, if things were that bad, and it went 18 months, I think we’d have bigger issues or problems to deal with.”
Additionally, the deal would have MotorCity’s financing boosted to $570 million, split between a five-year term loan and senior unsecured notes, Crains’s reported. Under terms of the old financial deal, MotorCity was operating with a $282 million term loan and another $200 million in senior unsecured notes, both of which are due to mature in the summer of 2021 and later in 2022.
COVID-19 downturn was real and unspectacular
Of course, all this financial maneuvering comes on the heels of a global pandemic that forced MotorCity — along with the state’s other casinos governed by the MGCB — to close down on March 16. MotorCity, MGM Grand Detroit, and Greektown Casino were not allowed to open back up (at severely limited capacity) until Aug. 5. The state’s tribal casinos, which operate under federal law, were mostly back up and running in May.
As a predictable result, revenues at MotorCity, MGM, and Greektown cratered, down 65% year-over-year through July.
Of course, it’s not just the casinos that took the hit; tax collection on casino revenue, a major source of income for both the city and state, took a massive nosedive. From January to July, Detroit took a $66 million haircut in casino revenue tax collection, and the state of Michigan lost out on an additional $45 million.
But while things were bleak there for a time, the pendulum is starting to slowly turn, as Dall noted during the presentation. He said casino revenue was starting to crawl back to pre-pandemic numbers, with MotorCity’s revenue in September at 83% of what it was for the same time last year.