Mohegan Inspire faces uncertain future with looming debt defaults, contractor litigation

Mohegan Gaming & Entertainment, the United States-based operator of the Mohegan Inspire Entertainment Resort in South Korea, is grappling with mounting financial pressures and litigation. The company’s latest financial disclosures reveal concerns over its ability to meet debt obligations and ongoing disputes with its general contractor.

In its annual report and results for the fiscal year ending September 30, 2024, Mohegan acknowledged that its "upcoming debt maturities and anticipated default" under a $441.8 million Korea Term Loan have raised questions about the company’s viability as a going concern. This uncertainty is compounded by the need to refinance a separate $704 million Korea Credit Facility due in November 2025.

Mohegan stated it had not secured waivers for failing to meet certain financial covenants under the Korea Term Loan. If lenders exercise their rights, they could claim collateral, including shares in the Mohegan Inspire property.

The company admitted that its plans to refinance the loan, secure additional liquidity, and obtain waivers are subject to market conditions and cannot be guaranteed.

The $1.6 billion Mohegan Inspire property, which opened its non-gaming operations in November 2023 and a foreigner-only casino in February 2024, has yet to turn a profit. In the fiscal year, the property generated $163.3 million in revenue but reported a negative EBITDA of $49.5 million.

Adding to the financial challenges, Mohegan is facing litigation from the main contractor involved in the South Korean development. The contractor is seeking reimbursement for costs related to change orders and other claims.

Mohegan counters that it has substantial defenses and offsetting claims for delays and repairs. However, the company noted it is too early to determine the likelihood or potential impact of an unfavorable outcome in the litigation.

Mohegan’s debt burden extends beyond South Korea. The company reported total long-term debt with a face value of $3.14 billion, including senior secured and unsecured notes that could face cross-defaults if the Korea loans are not refinanced. 

The company’s annual report emphasized that substantial doubt about its ability to continue as a going concern remains unresolved. “Management plans to refinance... and seek additional sources of liquidity,” the report stated, but acknowledged that these plans are not finalized and are beyond the company’s control.

Mohegan Inspire’s financial woes come as the global integrated resort sector continues to recover from the pandemic. Competing properties in the Asia-Pacific region, such as those in Macau and Singapore, are benefiting from stronger market conditions and established financial frameworks.

Despite its challenges, Mohegan’s broader operations, including its flagship Mohegan Sun in Connecticut and properties in Canada, generated net revenues of $1.9 billion for the fiscal year, a 13% increase from the prior year. However, adjusted EBITDA fell to $349 million, down $50.9 million from 2023, reflecting the broader strain on the company.