GM Mirage, based in Las Vegas, is under intense pressure to raise cash to meet looming obligations on its us$ 13.5 billion in debt as well as salvage City Center, the troubled us$ 8.6 billion Las Vegas development owned by MGM Mirage and Dubai World that still needs billions in funding.
Property sales would help lower debt and could aid MGM Mirage in finding a broader solution to issues that weigh on the company and its CityCenter joint venture on the Las Vegas Strip. Partner Dubai World has sued and asked to be relieved of its funding obligations, a move that threatens to throw the unfinished project into bankruptcy. MGM Mirage also risks default on its us$ 7 billion senior credit facility.
MGM Mirage, controlled by Kirk Kerkorian, is working to come up with a long-term plan to fund CityCenter by April 13. The project’s banks waived defaults for two weeks on the senior secured credit facility after MGM Mirage made a us$ 200 million construction payment on March 27 that covered Dubai World’s half.
Los Angeles-based buyout firm Colony Capital LLC has held discussions with MGM Mirage and Dubai World that include a possible investment in CityCenter, a person familiar with the discussions said on April 1.
Australian billionaire James Packer’s Melbourne-based gambling company, Crown Ltd., is discussing an investment alongside Colony, the Wall Street Journal reported on April 3. Last month, Crown called off a planned us$ 1.75 billion takeover of Cannery Casino Resorts LLC, owner of three Nevada casinos and the Meadows racetrack near Pittsburgh.
MGM Mirage and Dubai World are obligated to fund about us$ 800 million more in construction costs before they can access a us$ 1.8 billion loan to complete the project. MGM can provide its share, said company spokesman Alan Feldman. “We have the money to complete CityCenter,” Feldman said in an interview. He declined to comment on speculation regarding Packer’s role.
Geoff Kleeman, a spokesman for Melbourne-based Crown, didn’t return voicemail messages left by Bloomberg News after business hours. A Dubai World spokesman declined to comment.
MGM Mirage, the largest owner of casinos in Las Vegas with properties including the Bellagio, Luxor and MGM Grand, has seen cash flows decline as recession led the Strip to its biggest drop in gambling revenue on record last year.
The company won a two-month reprieve from banks on March 18 to come up with a debt restructuring plan after auditors questioned the company’s ability to stay in business. The covenant waivers on the company’s us$ 7 billion bank-loan facility were contingent on MGM Mirage and Dubai World continuing to fund construction on CityCenter.
MGM Mirage is likely to pursue a combination of asset sales, bond buybacks, fresh secured loans and discounted debt exchanges, as well as raising new capital, CEO James Murren said in March. He completed the us$ 775 million sale of the Treasure Island hotel on the Strip to investor Phil Ruffin in March.
The Beau Rivage and MGM Grand Detroit may fetch between us$ 1 billion and us$ 2 billion, the Wall Street Journal reported yesterday, citing analysts’ estimates.