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twitterCityCenter contingency plan emerges; investor shows interest
Steve Marcus
The CityCenter project on the Las Vegas Strip.
Published Wednesday, April 1, 2009 | 4:23 p.m.
Updated Wednesday, April 1, 2009 | 5:49 p.m.
Sun archives
- CityCenter safe — for now (3-28-09)
- In a recession, a delay could be seen by rivals as a positive development (3-28-09)
- Shutdown would leave few other options for many in construction (3-28-09)
- A financial history of the CityCenter project (3-28-09)
- Letter sent to MGM Mirage employees from CEO James Murren (3-27-2009)
- MGM MIrage payment keeps CityCenter on track (3-26-2009)
- MGM lending pitch from Ensign, Reid so far on ethical up-and-up (3-25-2009)
- CityCenter partner might want more say (3-25-2009)
- Lawsuit clouds future of CityCenter; MGM responds (3-23-2009)
- MGM Mirage gets debt waiver, swings to quarterly loss (3-17-2009)
- MGM Mirage's cash crunch (3-3-2009)
- The state of our engine (3-1-2000)
- MGM Mirage wants to tap $4.5 billion credit (2-27-2009)
Document
Beyond the Sun
The drama surrounding the financially troubled CityCenter project has thickened, with a major investor interested in the $8.7 billion project and MGM Mirage disclosing a contingency plan should CityCenter seek bankruptcy protection.
In a regulatory filing today, MGM Mirage said its bank lenders have allowed the company to earmark up to $20 million for expenses "necessary to ensure public health, safety and welfare or regulatory compliance in connection with CityCenter Holdings."
A source close to MGM Mirage, who declined to be identified, said the safety fund isn't an indication that a bankruptcy filing is imminent for CityCenter. However, the source said the fund would allow for a pause in construction should the CityCenter partnership need to seek bankruptcy protection.
The $20 million fund is an indication that Chapter 11 bankruptcy protection may come soon for CityCenter, which is owned by 50 percent partners MGM Mirage and Dubai World.
The fund would allow CityCenter to wind down while its debts are restructured. It would also allow for the project to resume in an orderly fashion while it proceeds through the bankruptcy reorganization process, the source said.
MGM Mirage spokesman Alan Feldman declined comment on the filing other than to say that the company continues to negotiate with banks to find a funding solution for CityCenter.
Another option besides bankruptcy is that a third party could step in to fund CityCenter. Today, sources familiar with those negotiations said Colony Capital – the private equity firm that financed the management-led buyout of Station Casinos – has expressed interest in investing in CityCenter or brokering some kind of agreement between MGM Mirage and Dubai World. Those discussions are "very preliminary," a source said.
Representatives for Colony, MGM Mirage and Dubai World declined comment on Colony's interest in CityCenter.
"Talks are being held with a number of potential investors in a cooperative fashion but so far none are particularly close to a resolution," according to a source with Dubai World who declined to be named.
Like many real estate funds, Colony has been hard hit by the economic downturn, while Station, sustaining steep losses in the recession, is close to filing for Chapter 11 bankruptcy protection. Colony also has stopped making mortgage payments on its Resorts Atlantic City casino, which could trigger foreclosure by lenders.
Like many real estate funds, Colony has been hard hit by the economic downturn, while Station, sustaining steep losses in the recession, is close to filing for Chapter 11 bankruptcy protection.
Half-finished buildings have continued under Chapter 11 bankruptcy protection, as borrowers are still required to pay creditors while they restructure debts in bankruptcy court, local bankruptcy experts say.
The stakes are high for CityCenter, the nation's largest privately-financed construction project. More than 8,000 construction workers are building CityCenter, which is expected to employ more than 10,000 people when it opens in late 2009.
Both partners say they have an economic interest in finishing CityCenter, in spite of the global recession and the damage it has done to both companies, because the project is so far along in the construction process.
The partnership still needs at least $1.8 billion in financing to complete CityCenter at a time when banks have pulled back on lending and Dubai World appears unwilling to make future payments to fund it.
Dubai World sued MGM Mirage last week, saying MGM is on the verge of bankruptcy and its $4.3 billion investment is at risk. Dubai World claims MGM Mirage mismanaged CityCenter, leading to cost overruns.
The regulatory filing contains details of the waiver MGM Mirage received from bank lenders to make a required $200 million payment that was due Friday.
MGM Mirage made its $100 million payment as well as another $100 million on behalf of Dubai World, which refused to put in its share.
The waiver expires April 13, which is when the next monthly payment by both MGM Mirage and Dubai World is due.
Given that Dubai World has criticized the way MGM Mirage has managed CityCenter, the company may decide not to make that payment, which would require MGM Mirage to come up with the money or trigger a bankruptcy filing by CityCenter.
Bailing out CityCenter isn't a permanent solution for MGM Mirage, which is also facing bankruptcy protection as it scrambles to raise cash needed to make upcoming debt payments. The company, which recently sold its Treasure Island casino, is considering other casino sales to fund operations and prepare for a debt payment of more than $1 billion coming due later this year.
MGM Mirage would require another waiver from its bank lenders to make the next payment April 13.
Even if MGM Mirage can dig up more cash to make that payment, Chapter 11 bankruptcy may be unavoidable for MGM Mirage unless the company can sell significant assets quickly or a benefactor comes to the rescue, analysts say. A Chapter 11 filing by MGM Mirage could trigger a bankruptcy filing for CityCenter, whose lenders are some of the same companies that have loaned money to MGM Mirage.
Discussion: 15 comments so far…
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Maybe harry Reid can call the banks and force another loan for his constituent.
I know how to resolve this financial quandary:
neiman1 and MGM Mirage can become a powerful symbiotic force where 1)neiman1 can raise billions by selling his sperm to cryobanks around the world with the help of MGM Mirage's marketing expertise. With his thoughtful, innovative posts, it's clear neiman1 has the highly-evolved seed to ensure the survival and continued dominance of the human race.
But in addition to his unimpeachable intelligence, you know neiman1 is quite the Adonis, which will no doubt amplify the demand for his gametes. Why do you think he has the time to sit at home and troll this site all day? Why if he were to strut around in public too openly, his life would be endangered by countless women throwing themselves at him and the jealous, enraged husbands and boyfriends wanting retribution.
So please neiman1, for the love of the emotionally beleaguered citizens and lovers of this city, do the right thing.
My guess is that LemonSky is in the Obama, Reid, Pelosi camp.
So maybe Reid can call the banks for MGM.
Don't bother with the corporate spin. The $20 mil put aside is a very real indication that a halt to construction is imminent . As cash strapped as MGM is, they would not and could not put $20 mil aside cash as some kind of precautionary measure.
I live in New Jersey and as straight foward as LV Sun is in reporting the news, the plight of strip casinos is more bluntly told by newspapers out the Vegas area. I think the Sun is a little too liberal in publishing quasi rosie casino corporate spin. Publishing the corporate bs spin in the face of pending doom is a little like being in denial and doesn't 100% serve the local market.
LemonSky, you are a hoot!! That post made me laugh. Glad there are witty readers with an edge out there.
By the way... is gotjobs one of neiman1's offspring?
If Colony is not making mortgage payments ( stiffing their lenders) on their AC property and they are neck deep in Station debacle, how can they be a qualified, (not good but unbelievably good credit, lot's of cash) interested investor in City Center? It's all about taking a mild rumor and spinning it at 78rpm to get desired effect. But here's LV sun pumping it into a headline!
Frankm507, way to slam the Sun for no reason. Everyone is reporting this.
I respectfully disagree mbellhornst. I don't see any newspaper outside the Vegas area reporting the same story. You cannot expect to get objective reporting on the local gaming industry from a newspaper that is part owner of a casino. It's a built in conflict of interest, like a state run newspaper.
Frankm507, I respectfully disagree with you.
I first read about this story on WSJ.com, then on Bloomberg, and finally on MarketWatch. The Sun was the last out of the four places I checked that had a story up.
The LAS VEGAS Sun covers gaming. Big whoop.
I thought same as Frankm. How can an outfit not paying its bills be a white knight?
Skerlahdee, Colony is a private equity firm. They raise funds and buy assets. Those assets act as subsidiaries of Colony Capital - if one investment is not generating enough cash flow, they have plenty more earning. So, if Station goes bankrupt, it's not Colony - it's Station, of which Colony is a majority investor. They are probably seeing CityCenter as going at a significant discount, so they can get a substantial equity stake for a lower price - and they'll go out and raise money from investors to make the deal.
neiman1 does does not have a wife. He lives with his parents and while they are at work he disobeys their orders to leave the computer alone. Thanks Bush for eight years of lies and deception as you and your cabal ruined America.
gotjobs either is ignorant or drinking out of neimans cup. He forgets what Bush did to America while protecting his donors as he was preaching to America how our economy was stong.
matts7052 well put.
i hope they don't stop construction. that would really put a nail in vegas' coffin.
Yeah maybe Colony was buying assets when times were good!.Just what investors is colony going to get for a project that has brought down the largest gaming co in the world? In a town that is reeling from the recession where there is no upturn in sight where there is already an massive over capacity of rooms. Please people, stop talking like it's 2006 again! I just here Colonmy now "Oh ho hum, let's buy another disastrous casino project"!
Have you seen what wall street thinks of MGM and City Center?
Think about it....if the overall 8.7 Billion dollar project had been signed by all parties with the intent to build and then proceeded building as the money was released....you would be looking at several "completed" buildings and a ton of undeveloped land...then when markets improve and money is flowing better....complete another part of the overall project.
I tend to stick my toe in the tub first...to see how hot the water is before I jump completely in.