MGM Mirage removes bankruptcy warning

By Liz Benston

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

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.