Boyd, Mirage looking at expanded AC resort

David Strow

Friday, May 5, 2000 | 11:06 a.m.

Mirage Resorts Inc. is in talks with Boyd Gaming Corp. to significantly expand the scope of the Borgata, a resort casino planned for Atlantic City.

In its quarterly report filed Thursday with the Securities and Exchange Commission, Mirage Resorts said it was in discussions with Boyd to increase the size of the Borgata from 1,200 rooms to 2,000 rooms. The cost of the project would escalate from $750 million to more than $1 billion.

"If the necessary permits and financing are obtained, construction of the Borgata could begin by the end of this year," the report stated.

The project is a joint venture between Mirage Resorts and Boyd Gaming. If the proposed changes are approved, it would be the second escalation in the resort's price and scope -- when originally announced in mid-1998, Boyd and Mirage envisioned a 1,000-room, $500 million resort.

"Atlantic City (gaming revenue) numbers have been on the rise for some time," said Rob Stillwell, Boyd Gaming spokesman. "We have what we believe to be the best development opportunity in the gaming industry today. We want to make sure we do the right thing."

Stillwell said he would be uncomfortable predicting the likelihood of the expansion talk becoming reality, but added that "the fact that it was in their (quarterly report) speaks to the seriousness of it."

The expansion would require the two partners to significantly increase their cash contributions to the project.

The Mirage Resorts filing said each partner would be required to kick in an additional $57 million cash into the larger project. This would increase Mirage Resorts' cash contribution to $117 million, and Boyd Gaming's to $207 million.

To date, Mirage Resorts has invested $7 million in the Borgata. Mirage Resorts' contribution would also include a 25-acre land parcel, valued at $90 million.

These contributions would suggest the partners intend to seek more than $500 million in outside financing for the Borgata, up from $450 million.

The expansion plans signal a strong commitment to Atlantic City by Mirage Resorts' merger partner MGM Grand Inc., as MGM Grand tries to pare back debt and achieve cost savings after the $6.7 billion merger.

After MGM Grand's deal to acquire Mirage Resorts was approved, Mirage Resorts began scaling back capital spending plans, shelving plans to build a new $250 million hotel tower at the Bellagio.

This rollback in capital spending has allowed Mirage Resorts to pay down more than $140 million in debt during the March quarter. Mirage Resorts carried $1.93 billion in debt as of March 31, well below the $2.15 billion maximum debt load allowed by the Mirage Resorts-MGM Grand merger agreement.

But the expansion of the Borgata apparently has MGM Grand's blessings.

"MGM is involved in this (Borgata talks)," Stillwell said. "Absolutely."

Less clear is the status of other Mirage expansion projects, particularly Mirage's long-standing plans to build "Le Jardin," a billion-dollar resort near the Borgata.

"Because of the pending merger with MGM Grand, we cannot be certain of the ultimate design, timing, cost or construction of (Le Jardin)," the Mirage report states. "Our plans for a new hotel-casino resort on the site of our existing Boardwalk hotel-casino and adjacent land on the Las Vegas Strip, as well as our contemplated hotel expansion project at Bellagio, are also subject to MGM Grand's analysis and approval following the merger."