here had been speculation that City Center, the us$ 8.6 billion Las Vegas development owned by MGM, would miss the payment and file for bankruptcy protection, putting the completion of the massive project in doubt. Shares, which were down 19% ahead of the news, were halted at us$ 2.51 ahead of the news but rebounded afterwards. They recently were up 5.2% at us$ 3.25 in recent trading.
MGM said Friday it would work with Dubai World, its investment partner in the project, and its lenders to find "a long-term solution for the financing of City Center's completion." Chairman and CEO Jim Murren added, "We are doing our utmost to see that this project continues, keeping thousands of Nevadans employed. We will continue to make every effort to see that City Center is completed."
MGM was sued earlier this week by Dubai World, which alleged the troubled casino operator breached the terms of their venture. MGM has said the suit is "completely without merit." Dubai World World has blamed MGM for massive cost overruns on City Center.
The City Center project is a stark example of how excesses spawned during a lengthy gambling boom are coming back to haunt the casino industry. The project is so large that thousands of workers depend on it for jobs. Las Vegas has been reeling from a slump in tourism revenue, as hotel-room occupancy rates have dropped, pushing up unemployment in the region above the national average.
Last week, the company reported it swung to a fourth-quarter net loss on a us$ 1.2 billion write-down, and the company said it saw weakness in gaming and the economy in general in the first quarter. Shares of MGM Mirage, a casino operator controlled by billionaire Kirk Kerkorian, closed down nearly 8 % after earlier falling more than 18 %.
MGM Mirage, which has a big presence on the Las Vegas Strip, may sell more assets as it races to negotiate new terms with lenders to avoid defaulting its debts. The company already won a waiver from lenders of covenants on its senior credit facility through May 15. The firm, which has 17 casinos in Nevada, Mississippi and Michigan, and 50% stakes in four others in Nevada, New Jersey, Illinois and Macau.
Sources said CityCenter had hired law firm Dewey & LeBoeuf to prepare for a possible bankruptcy as early as Friday. Such a filing depended on the outcome of talks between MGM Mirage, Dubai World and their lenders, added the sources, who asked to remain anonymous because the talks were private.