Moody’s downgrades MGM Mirage, again

By Amanda Finnegan

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

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.