Moody’s downgrades MGM Mirage, again

Thursday, March 19, 2009 | 2:27 p.m.

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)
MGM, Dubai World said in talks with Deutsche Bank (2-23-2009)

Moody’s Investors Service downgraded MGM Mirage for the third time in four weeks today due to the company’s decline in liquidity after it announced Tuesday it will pay back $300 million to its senior credit facility.

MGM Mirage’s repayment agreement with bank lenders, who are owed billions, is part of a waiver of potential covenant defaults. The waiver also includes prohibitions of new investments, accumulating additional debt and the sale of casino properties. MGM Mirage said Tuesday it is likely to default on certain financial requirements after the waiver expires May 15.

The credit rating service downgraded MGM Mirage’s probability of default rating to Caa3 from Caa2 and its corporate family rating to Caa2 to Caa1.

Moody’s said this waiver “places significant pressure” on MGM Mirage to obtain additional bank concessions, raise additional liquidity or restructure its capital structure, the ratings service said.

Moody’s estimated the pending sale of Treasure Island, combined with cash on hand, will not be enough to fund the company’s obligations over the next 12 months, including ongoing construction at CityCenter and required bond maturities through the year.

Last week, Moody’s downgraded MGM Mirage’s probability of default rating and family credit rating to Caa1 and Caa2, respectively.

MGM Mirage reported Tuesday that its financial situation had drastically changed from a year ago. The company reported a loss of $1.1 billion, or $4.15 a share, for the fourth quarter of 2008, compared to $872.2 million profit, or $2.85 a share, during the same period for 2007.

Discussion: 2 comments so far…

By bdover

3/19/09 at 7:53 p.m.

Suggest removal

I posted on CBSMarketwatch.com a little over a year ago how some of us retired locals felt that MGM was toast-that it was over leveraged and over extended. I was excoriated and lambasted by a bunch of know-it-alls from all over the country. "You're ignorant, it's an excellently run company, you need to check your facts, etc". It's funny-a bunch of afternoon casino imbibers knew more than all the geniuses from NY to LA. Simply because we live in Vegas. Peter Lynch said in his book years ago that investors should follow those companies that they are most familiar with. In this case, we knew people who worked at MGM, and we knew the place was a complete ripoff. Now it's goin' down big time...Lori, another Fat Tire, please...
By manfromuncle1

3/25/09 at 12:44 a.m.

Suggest removal

Watch "Inside the Meltdown" on Frontline (go to pbs.org). It's a documentary about Bear Stearns and Lehman Bros that unfolds like an episode of "24". It begins when Bear Sterns executives realize that they don't have enough cash to open for business. Weeks later when the Fed Chairman decides to let Lehman Bros go under, somebody tells him "Dude, you just destroyed the world". That sounds like MGM Mirage: they don't have the cash for bond payments or continued CityCenter construction. Apparently the money that Americans shelled out for $5 a gallon gas has ended up paying for artificial islands in Dubai and a half finished CityCenter. (Now that Yucca Mountain is closed, maybe they could use those fake islands for nuclear waste storage. Or how about using City Center as a Public Storage facility) I guess it's true that only smart people can make some truly colossal mistakes. lol