he senior-secured 9 % notes due 2020 sold at par to yield 5.29 percentage points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The bonds will be backed by the MGM Grand casino resort in Las Vegas.
On institutional investors returning to casino companies, Murren said: “Gaming has improved a bit. We felt that there’s been a little bit of trading back into gaming securities in general, debt and equity securities. Investors are starting to play a little bit more of that cyclical recovery that we hope to get, that you’d get in gaming.”
“A recovery is predicted by the investors. No one really knows for sure the trajectory of the recovery or the time it will take for it to gain substantial traction, but it seems a consistent message that the U.S. economy has hit a bottom, Las Vegas has hit a bottom, there are more signs that show positive trends in 2011 and beyond.”
About MGM Mirage’s one-year turnaround, he commented: “Exactly a year ago, we were in the throes of our darkest hours, being sued by our partners, having financing falling apart at CityCenter, having bond prices in gaming and for us trading at lows. If you could get bonds, it would be (yielding) in the mid to high teens. We’ve gone from that environment to an environment where we can issue single-digit coupon, on par, and have a book dramatically oversubscribed. We had well over us$ 2 billion of orders in the book.”
Buyers included “names who have been investing alongside us for 20 years, many of which wouldn’t consider us a year ago,” he added.
When asked about the timing of the bond sale, he affirmed: “I don’t know how many bonds have been sold at par lately; all the issuers have been selling bonds with an OID (original issue discount). A par bond was very unique, you’d have to go back and check there can’t have been many par bonds this year at all in any industry. I don’t think there’s been one in gaming since early 2008. We were able to drive price down to the absolute low end of the 9-9.25” %.
“With a little bit of wind at our back, a fairly light calendar this week, and good institutional interest in gaming it was the right time to go. In our case, a bond secured by the MGM Grand Vegas, which is worth vastly more than the face amount of the bonds, investors felt that was a pretty safe bet to make.”
On other recent casino-debt amendments, extensions and deals, he stated: “We were left for dead a year ago as an industry. There’s a reason why the commercial banking industry has historically liked gaming a lot. We have been traditionally very good clients to have, we throw off a lot of cash, we’re very bank dependent, we have huge payrolls, we have operating cash, we have disbursement accounts and we’re very capital-market intensive. Investment and commercial banks have done extremely well, it’s been a very lucrative investment field for them for many, many years. The banks are being more cooperative, companies are being more realistic.”