MGM Mirage removes bankruptcy warning

Tuesday, June 23, 2009 | 2:56 p.m.

Headlines from the Vegas gaming industry

MGM Mirage announced in a Securities and Exchange filing today that there is no longer "substantial doubt about its ability to continue as a going concern" after recent efforts to negotiate with lenders and trim the company's massive debts.

MGM Mirage raised about $1.1 billion last month after completing a public offering of 164.5 million shares of stock at $7 per share. The company also issued $1.5 billion in senior secured notes.

The "going concern" warning surfaced in the company's annual report March 17, which became the basis of a lawsuit by Dubai World, MGM Mirage's business partner in CityCenter. Dubai World, which sought a guarantee that CityCenter be completed on budget, dropped the suit after CityCenter's lenders agreed to finance the project, which might have otherwise filed for bankruptcy protection, to completion.

MGM Mirage executives downplayed the risk of bankruptcy at the time, saying independent auditors required the company to include the warning in the company's 10-K.

Rather than demanding repayment, lenders have been willing to negotiate with MGM Mirage because they lacked collateral in the company's major casinos. The company may exchange such collateral for the ability to delay or renegotiate debt payments. MGM Mirage, which has been unwilling to unload any Las Vegas Strip properties, also has marketed the company's MGM Grand Detroit and Beau Rivage casinos for sale.

While MGM Mirage has averted the immediate threat of Chapter 11 bankruptcy, some critics warn that the company's debts – $14.4 billion as of March 2009 – may be unsustainable.

Discussion: 2 comments so far…

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By BorisR

June 24, 2009

9:52 a.m.

Suggest removal

Now I see how come that MGM stocks jacked up today. Stocktraders are just another sort of gamblers. They read a message and interpret the future development of this single message. Wait till the next bad news is to come up and then the same investors will go on panic and dump their stocks on Wall Street.
By matteo2003i

June 25, 2009

6:08 a.m.

Suggest removal

Yes, each individual is a sort of "gambler," to the extent that nobody can know the future--but millions of traders are reading millions of different news stories like this, looking into company filings, and talking with company insiders etc., and it is this daily give and take (or buy and sell as the case may be) that makes the market work. In fact, no single entity could digest the shear volume of information that is required to make informed decisions. But the aggregate effect of the decisions of millions of investors, make the free market the most accurate business analyst out there.