MGM Mirage gets waiver for $70M CityCenter payment

By Steve Green (contact)

Published Monday, April 13, 2009 | 4:24 p.m.

Updated Monday, April 13, 2009 | 6:31 p.m.

MGM Mirage took another step Monday on the road to finalizing the financing for CityCenter, confirming its banks will allow it to make the next $70 million payment due Friday with or without partner Dubai World.

Monday's announcement is part of a larger effort by the casino-resort company to both finalize financing for the $8.7 billion CityCenter entertainment and residential destination on the Las Vegas Strip due to start opening at the end of the year; and to realign its debt-heavy balance sheet.

"MGM Mirage today announced that it has received the support of its banks and has entered into an amendment of its senior credit facility," the company said in an afternoon announcement, confirming earlier media reports that helped push the price of its stock up 18 percent, or 95 cents, to $6.25 on Monday.

"Under the newly obtained amendment, MGM Mirage’s senior lenders have provided the company with the ability to pay the full amount of current construction costs for CityCenter totaling $70 million due no later than April 17. This amendment allows MGM Mirage to fund Dubai World’s $35 million share, should Dubai World not do so. MGM Mirage remains committed to finding a long-term solution to the financing of CityCenter to ensure the completion of this important project," the company said.

Dubai World, sources have told the Las Vegas Sun, is seeking assurances from MGM Mirage and its lenders that the project won't go into bankruptcy and will be completed.

It was unclear Monday if Dubai World would make its share of the payment this week and Dubai World officials could not immediately be reached for comment. Last month, after suing MGM Mirage, Dubai World did not contribute to a required $200 million payment on CityCenter -- a payment made by MGM Mirage with the approval of its lenders. That was one of several installments that need to be made before the partners can access a $1.8 billion bank loan for CityCenter construction.

Including the $70 million due Friday, about $800 million is left to be paid before the bank loan kicks in.

The second half of MGM Mirage's financial equation is aimed at realigning its balance sheet, with some $13 billion in debt -- an amount the company is having difficulty servicing because the recession has slowed spending at its casinos and resorts nationwide.

MGM Mirage is exploring multiple options that likely include an equity infusion, a debt exchange, the trading of debt for one or more assets and the outright sale of one more of its assets. Those assets include wholly owned resorts, resorts it has a partnership in and important land holdings in markets including Las Vegas and Atlantic City.

"They need to do something soon," said Andrew Zarnett, a debt securities analyst at Deutsche Bank, who said the company faces note payments of $227 million in July and $821 million in October.

He said there is some urgency to the situation because the sale of a casino to a party without a gaming license could take an extended time to close because of the lengthy background checks and hearings required of gaming applicants.

Another complication is that MGM Mirage may have to pledge as collateral some of its holdings to get banks to relax their covenants governing the ratio of cash flow to debt -- meaning those properties can't be sold to raise cash.