VICI Properties (NYSE: VICI), recognized as the leading owner of casino real estate on the Las Vegas Strip, has successfully priced $1.75 billion in senior unsecured notes. The proceeds will be allocated to settle or mitigate debt obligations due later this year.
The real estate investment trust (REIT) is offering $900 million in bonds set to mature in October 2031, with a coupon rate of 5.4%, alongside $850 million in unsecured notes maturing in October 2036 at a rate of 5.75%. Longer maturities typically carry higher interest rates due to the increased risk faced by bondholders.
“The Issuer plans to utilize the net proceeds from this offering to pay off all or a portion of its outstanding senior notes totaling (i) $480.5 million at 4.500% due in 2026, (ii) $19.5 million at 4.500% due in 2026, and (iii) $1.25 billion at 4.250% due in 2026. Remaining proceeds will support general corporate initiatives, such as property acquisitions and enhancements, capital expenditures, working capital, and debt repayment or refinancing,” according to a statement released by the New York-based REIT.
VICI’s dual bond offerings received a BBB- rating from Fitch Ratings, maintaining a position within the lowest tier of investment-grade ratings consistent with the landlord’s classification across major ratings agencies.
VICI Adapts to Challenging Interest Rate Landscape
The $1.75 billion debt issuance by VICI is significant for at least two reasons. Firstly, it demonstrates the owner of Caesars Palace’s dedication to reducing imminent maturities. Secondly, it is undertaken amid a difficult interest rate environment.
Given their elevated debt levels, REITs are especially susceptible to changes in interest rates, generally benefiting when borrowing costs decrease. However, futures for Fed funds and prediction markets suggest minimal chances of rate cuts this year. Had rates declined earlier, VICI might have secured better terms for the $1.75 billion unsecured debt offering.
While VICI’s stock price may not indicate confidence, the Venetian owner appears to be skillfully managing uncertainty from the Federal Reserve.
“Investment activity remains cautious and aligns with the company’s financial strategies, including leverage management,” notes Fitch. “VICI could temporarily exceed Fitch’s 5.5x downgrade sensitivity if it maintains its ‘BBB-’ Issuer Default Rating (IDR) while pursuing strategic acquisitions alongside a credible deleveraging plan.”
Ongoing Relationship with Caesars in Focus
While bondholders may support VICI’s strategy to mitigate the upcoming 2026 maturities, they, alongside shareholders, are likely monitoring the ongoing negotiations with Caesars Entertainment (NASDAQ: CZR) regarding the casino operator’s regional master lease.
This issue has negatively impacted VICI’s stock performance, yet both the REIT and the gaming company provided limited updates during their recent second-quarter earnings calls. With Caesars facing a $17.6 billion acquisition bid from Fertitta Entertainment Inc., creditors and shareholders are expected to seek clarity on the negotiations between the two firms.
“VICI’s reliance on Caesars poses increased risks due to declining rent coverage within Caesars’ regional master lease and the company’s acquisition by Fertitta Entertainment Inc. Negotiations could yield various results, including rent concessions, asset transfers, or lease extensions, potentially impacting VICI’s cash flow,” adds Fitch.
VICI’s annual base rent is heavily reliant on Caesars (38%) and MGM Resorts International (32%).