MGM Mirage gains CityCenter waiver as Dubai World offers plan

The accord extends last month’s agreement letting Las Vegas-based MGM Mirage pay both partners’ obligations, two people familiar with the discussions said yesterday. They declined to be identified because the negotiations are private.

Dubai World has submitted a proposal to complete CityCenter and resume payments in exchange for concessions, one of the people said, declining to provide details. The state-owned investment company sued and stopped funding construction last month after auditors questioned the survival of MGM Mirage, controlled by Kirk Kerkorian.

“We cannot comment on specifics of our discussions but we continue to be fully committed to completing CityCenter and we continue to work with our partners and the lenders to seek a solution,” George Dalton, Dubai World’s general counsel, said yesterday in an e-mailed response to questions.

MGM Mirage, the largest casino operator on the Las Vegas Strip, faced an April 13 deadline to win approval from banks to cover the next payments. Under a two-month waiver MGM Mirage won from lenders in March, the partners were required to split construction costs.

In its lawsuit, Dubai World seeks to be relieved of funding obligations on CityCenter, a move that threatens to throw the 67-acre project, costing at least us$ 8.6 billion to build, into bankruptcy. MGM Mirage also faces a May 15 deadline to offer a restructuring plan for more than us$ 12 billion of corporate debt.

“We have already contributed us$ 4.3 billion, and we are standing ready to commit more money to see the project finished once we are sure our partners and the lenders will also commit, and there’s certainty about the future viability of MGM Mirage,” Dalton said. “This is in the interests of everyone.”

The biggest project on the Las Vegas Strip, CityCenter represents MGM Mirage’s largest expansion. The development, which includes a casino, hotels, apartments and malls, is due to open in December amid a global recession that led to the city’s biggest gambling decline on record last year.

In its Delaware Chancery Court complaint, Dubai World alleged MGM Mirage violated terms of their partnership, citing cost overruns on CityCenter and MGM Mirage’s inability to borrow or guarantee it can remain a going concern.

The equal partners had agreed to fund “just under” us$ 500 million each to fill a construction-payment shortfall until a us$ 1.8 billion bank facility becomes available in June, MGM Mirage CEO James Murren said on a March 17 conference call. Among the restructuring options MGM Mirage has discussed is a us$ 750 million secured loan from Los Angeles-based Colony Capital LLC.
 
Talks with Colony have been put on hold as MGM focuses on negotiations with banks, two people with knowledge of the discussions said on April 9. The discussions may restart and a loan is still possible, the people said.