Thursday, Feb. 28, 2002 | 11:02 a.m.
MGM MIRAGE has secured $4.3 billion in debt with its assets, following a recent downgrade of the Las Vegas company's debt by Moody's Investors Service.
While MGM MIRAGE carried an investment grade rating, its senior debt was unsecured. But a "springing lien" agreement with the company's banks requires the company to "recollateralize," or use its assets as security for the senior debt, if either Moody's or Standard & Poor's removes the company's investment grade ratings, said Jim Murren, president and chief financial officer of MGM MIRAGE.
Moody's downgraded MGM MIRAGE to "Ba1" in January, a "junk" rating.
"Once we get upgraded, the security falls away," Murren said. "It's a little benefit for senior noteholders."
Murren said the move wouldn't affect MGM MIRAGE's ability to buy or sell assets. He said the effect of debt downgrades on MGM MIRAGE would have been more severe with an S&P downgrade; that agency affirmed the company's investment-grade rating earlier this month.
Had S&P also downgraded MGM MIRAGE, Murren said the company's interest rates would have risen by three-eighths of a percentage point.
"Eight million (dollars) a year is what we saved with the S&P (affirmation)," Murren said.
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