MGM Mirage may leave New Jersey in dispute over Macau partner

The New Jersey Division of Gaming Enforcement in May found Pansy Ho to be unsuitable because of alleged organized crime ties of her father, Chinese casino operator Stanley Ho.

The New Jersey agency recommended MGM Mirage disassociate itself from Pansy Ho if it wanted to continue operating in New Jersey. That could have required MGM Mirage to sell its stake in the MGM Grand Macau in the world's largest gambling market. Nevada regulators earlier approved MGM Mirage's arrangement with Pansy Ho.

Las Vegas-based MGM Mirage could fight the New Jersey recommendation by taking the issue to hearings before the New Jersey Casino Control Commission - but instead is in settlement talks that could result in its departure from the New Jersey market.

Boyd Gaming Corp. of Las Vegas, MGM Mirage's partner in Borgata, would be a likely buyer of its partner's stake but has declined comment on the issue.

MGM Mirage said in a statement today "it is currently involved in constructive settlement discussions with the DGE (Division of Gaming Enforcement), which have centered on the company placing its 50 % ownership interest in the Borgata Hotel Casino & Spa and related leased land in Atlantic City into a divestiture trust for which MGM Mirage would be the sole economic beneficiary."

"While no definitive settlement with the DGE has been reached, the company has asked its lenders to consent to the trust arrangement. Any settlement is subject to both DGE and CCC (Casino Control Commission) approval," the statement said. The placement of the properties into a "divestiture trust” could put them on the path to being sold, should the settlement be reached with New Jersey regulators.

"We disagree with the New Jersey Division of Gaming Enforcement's recommendation to the Casino Control Commission concerning our Macau partner, but believe pursuing a settlement with the DGE represents the best course of action for our company and its shareholders," MGM Mirage Chairman and Chief Executive Jim Murren said in the statement. "We would like to put this matter behind us and move forward with the compelling growth opportunities we have in Macau."

Separately, the company said it's proceeding with plans to match cash flow projections with coming debt payments by extending the repayment dates for some of its us$ 12.9 billion in debt.

The company is seeking amendments to us$ 5.55 billion of senior credit facilities that would extend the maturity of a substantial portion of the debt from October 3, 2011, to February 21, 2014. The company has asked lenders to provide their final approvals of the transaction by February 24.

Lenders approving the proposed amendments would receive prepayments of at least 20 percent of their outstanding loans and lending commitments, as well as certain additional interest and fees. Reacting to today's debt-extension news, Moody's Investors Service placed MGM Mirage's ratings on review for possible modest upgrades.

Moody's MGM Mirage debt assignments now include speculative-grade Caa2 Corporate Family and Caa3 Probability of Default ratings and a SGL-4 Speculative Grade Liquidity rating. The SGL-4 rating means MGM Mirage has "weak liquidity," according to Moody's definitions.

"The successful closing of the amendment as proposed would be a positive step forward for MGM with respect to near-term financial flexibility as well as its longer-term ability to remain viable as a going concern," Peggy Holloway, a Moody's vice president, said in a statement.

Moody's said the degree of any upgrade would likely be modest given the company's high leverage, challenging operating environment, potential CityCenter financial commitments and its ability to close condominium sales at CityCenter on the Las Vegas Strip.

Key factors affecting the company's near-term and longer-term financial profile include "the challenging operating environment in Las Vegas," the potential sale of the company's interest in the Borgata and a possible Macau initial public stock offering, Moody's said.