Analysts at Goldman Sachs are calling MGM (NYSE: MGM) capital raise announcement after the close A "strategic positive" as it will reduce net debt to EBITDA.
The firm believes the equity issuance and the sale of Borgata provides some relief on balance sheet concerns. "We estimate the roughly $1 billion in combined proceeds reduces the 2010E net debt to EBITDA ratio from 9.7X to 8.8X," the firm states.
"For investors who wanted the best way to invest in the Las Vegas convention and leisure recovery but stayed away due to balance sheet risk, this capital raise resolves some of these fears," Goldman said.
Goldman also called the Q3 operating results "solid" and they support their view that MGM is making progress on EBITA recovery.
Other catalysts that could move shares shares higher are ahead, including the 2010 IPO of its Macau casino which is still on track, the firm notes.
The firm maintained their Buy rating and $14 price target on MGM.
JPM's take: Click to enlarge