Published Thursday, March 26, 2009 | 9:07 p.m.
Updated Friday, March 27, 2009 | 3:12 p.m.
Beyond the Sun
- CityCenter partner might want more say (3-25-09)
- Lending pitch from Ensign and Reid so far on ethical up-and-up (3-25-09)
- Reid, Ensign made calls to banks for MGM (3-23-2009)
- Lawsuit clouds future of CityCenter; MGM responds (3-23-2009)
- MGM Mirage gets debt waiver, swings to quarterly loss (3-17-2009)
- Before recession, success further fed gaming industry's egos (3-16-2009)
The Las Vegas economy dodged a bullet today when MGM Mirage stepped up to fund a required payment for CityCenter, keeping the project on track.
The hotel and gaming giant said that with the consent of its lenders, it provided $200 million in funding -- including a required payment of $100 million that partner Dubai World did not make today.
This allows construction work to proceed on the mammoth project on the Las Vegas Strip that includes hotels, residences, gaming, shopping and entertainment.
MGM Mirage said it intends to work with Dubai World, its lenders and others to find a long-term solution for the financing of CityCenter's completion. Another $800 million needs to be contributed in combined equity investments for the project, MGM Mirage said.
In response, Dubai World called the payment a "sign of good faith and of MGM’s commitment to the CityCenter project."
“Dubai World appreciates the support of MGM Mirage’s bank group and the CityCenter joint venture’s bank group in providing a waiver to its client that allows this payment. It is as an acceptable, albeit temporary, solution to the liquidity issues that MGM Mirage is facing, which are at the heart of the lawsuit filed in Delaware earlier this week," the company said in a separate statement today.
“The funding injection gives the CityCenter Board more time to work through restructuring options. Dubai World looks forward to working with MGM during this process and to completing the project to the benefit of all parties.”
MGM Mirage stock closed today at $2.85, down 24 cents. Before the funding announcement, it had fallen even further on concerns about the project.
"MGM Mirage believes that CityCenter is of vital importance to Las Vegas and the state of Nevada," Jim Murren, chairman and chief executive officer of MGM Mirage, said in a statement. "We are doing our utmost to see that this project continues, keeping thousands of Nevadans employed. We will continue to make every effort to see that CityCenter is completed and becomes an even greater economic driver for the region. We appreciate the support of our senior lenders and the CityCenter lending group. We continue to review with our partners all possible options to keep CityCenter fully funded and on a path to completion." (Read the letter from Murren to MGM Mirage employees)
The funding, at least for now, appeared to have eliminated a bankruptcy filing for CityCenter as an option to deal with the funding dispute between MGM Mirage and Dubai World.
"This was a more attractive option,'' said MGM Mirage spokesman Gordon Absher.
An insider at MGM Mirage Thursday confirmed that the CityCenter joint venture has hired the law firm Dewey & LeBoeuf, potentially for a bankruptcy filing if that becomes necessary.
The source, who is familiar with negotiations that took place Thursday night on the future of CityCenter, stressed that MGM Mirage itself did not hire that bankruptcy counsel.
MGM Mirage did hire the firm Weil Gotshal & Manges LLP for general counsel purposes, the source said.
While MGM Mirage may face difficulties in making payments on its massive debt load, the source pointed out that there are alternatives to bankruptcy.
One way for big companies to reduce debt is to engage in bond exchanges, which is exactly what Harrah's Entertainment is doing and which may be an option for MGM Mirage. In the case of MGM Mirage, there's also the possibility of an equity infusion from majority shareholder Kirk Kerkorian or others. Such an equity infusion is how Sheldon Adelson bolstered the balance sheet of Las Vegas Sands Corp. last year.
Asset sales are a possibility too, though properties on the Las Vegas Strip would likely fetch relatively low prices because the recession has hurt their business and just a few companies and their banks are in a position to buy.
Dubai World sued MGM Mirage on Monday, claiming MGM Mirage breached terms of the joint venture agreement to develop the $8.7 billion project, forcing Dubai World to invest more than expected for CityCenter while MGM Mirage's financial future is in doubt.
Because of MGM Mirage's financial troubles "the current path of the project is simply unsustainable," Dubai World said. Dubai World also alleges that MGM Mirage mismanaged CityCenter, going over budget and requiring higher-than-anticipated contributions from Dubai World.
MGM Mirage called the suit "completely without merit.''
Sun reporter Liz Benston contributed to this story.