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Published Thursday, March 26, 2009 | 9:07 p.m.
Updated Friday, March 27, 2009 | 3:12 p.m.
Related letter
Beyond the Sun
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CityCenter lawsuit
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Real Motive? seg. 1
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Sun Archives
- 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)
Beyond the Sun
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.
read between the lines on the p.r. "spin" here and they're basically saying they're going to stop construction and that's going to break the back of this town.
8500 people out of work even for a few weeks is really bad.
And what precisely were those 8500 construction workers going to do in December when the project is completed? Build houses? Isn't it just a matter of time before they will need to find work anyway? Also, Deutsche Bank's fear tactics are not surprising considering they own the Cosmopolitan, which will be directly impacted should CityCenter not open on time. Dubai's economy was collapsing almost a year ago now and the country was bailed out by Abu Dhabi (see an article from London's Daily Telegraph http://www.telegraph.co.uk/finance/break...). How on earth, given everything that everyone knew, could anyone have thought that CityCenter was going to be anything but a debacle from the get-go? And all throughout this unfolding story MGM executives have been haughty and dismissive simply saying that everything is going to be alright. At what point do their statements cross into the territory of misleading investors I wonder? I've yet to hear any stories about any of the hundreds of six-figure salaried executives being let go during all of this. Wasn't there a press release by MGM last year bragging about purchasing 50 million dollars in artwork for CityCenter? Where is that art and why don't they sell it back to help pay their contractors? AIG, ENRON, Worldcom...sound familiar?
"What will the impact of the class action lawsuit charging City Center Broker of Record (the esteemed and revered) Mssrs. Bob Hamrick and Tony Dennis with hundreds of illegal and unlicensed City Center condo sales to unsuspecting dupes in California be on the overall cash flow of the Partnership with Dubai World Infinity when none of these sales close escrow when this comes to light?".. Interview Scott Bonzell Esq of Oakland California, lead attorney for the plaintiffs.(your very newsroom has a copy of this filing as of 29 January 2009).
Who vetted these people? Hamrick was vetted by Lanni. Lanni doesnt have an MBA and was unqualified to vett anybody. Which begs the question, Lanni knew Hamrick was a bird of a feather and would do anything for money, ill-gotten or otherwise. Hamrick and his number one saleswoman Shanya Goldstein are NOT AT ALL LICENSED to sell in California. IN OTHER WORDS Hamrick sold all these illegal condos with Goldstien to cook the books and to impress Dubai World Infinity at the behest of Lanni (who understands niether arithmetic nor ethics as we all know from his perpetration of a fraud vis a vis his MBA from USC for decades. Hamrick by the way,barley graduated Vo-Tech high school and was never admitted to a college. There was real commonality with Lanni on the education issue) and in essence cuckholded Dubai with phony numbers to entice them to enter a doomed partnership. The condo sales were supposed to pay for the laergest part of building the project. And it was all a lie a fraud. Or as The Good Book says peoples faith in this massive undertaking were built on sand and like the Tower of Babel it's all falling down.
Here are two other links to support my earlier comments. Compare the dates.
http://prnewswire.com/cgi-bin/stories.pl...
http://www.lasvegassun.com/news/2008/apr...
Also, Perini is absolutely correct and I suspect the problem goes much deeper. When MGM Mirage collapses (which no one is gleefully wishing for despite the usual commentary) the shareholders and employees will need to dig deeper to see who was responsible for the loss of their investments, jobs, 401Ks and the like. This whole thing could have been avoided if the FTC had been doing its job and not allowed MGM Mirage to take over 50 percent of an entire city's economy. Merger upon merger coupled with nepetism and cronyism set the company on the path it's on today long before the economy started to tank. The economic downturn argument will only go so far. The Lion King and Terry Fator's big fat salary aren't going to look so clever when the house of cards collapses. Waste, fraud and abuse are S.O.P in corporate America right now and we the employees and the taxpayers are the victims. I applaud the Sun for taking on this tough story but now it's time to dig deeper and get tougher and not be bullied.
Yucca Mountain, CityCenter--how did Nevada become the capital of construction disasters? Check out the Frontline documentaries "10 Trillion and Counting" and "Inside the Meltdown" on pbs.org. CityCenter and artificial islands in Dubai are just as much to blame for the fall of the world economy as Bear Stearns, Lehman Bros and Countrywide (and Sallie Mae). Maybe they can use those fake islands in Dubai to store the nuclear waste that would have been sent to Yucca Mountain and they can use the half-completed CityCenter for the set of the next "Resident Evil" movie.
CityCenter Holdings LLC, a Delaware limited liability company, is the entity which MGM Mirage and Dubai World formed to own the CityCenter project. Neither MGM Mirage nor Dubai World directly own the limited liability company memberships in CityCenter Holdings, LLC. Instead, those memberships are owned by each player's subsidiary.
As a result, the members can put CityCenter Holdings LLC into a Chapter 11 bankruptcy, but not necessarily stop funding of the project.
It is very common for LLC members' parent companies who have large cash reserves to decide they are not going to put more money into a project as "equity", if a property is economically troubled.
Instead they file a Chapter 11 for the entity which owns the project, and then offer to have the two parent companies, who are not members of the LLC, lend money to the bankrupt entity. This is called a debtor in possession loan, and the bankrupt debtor's obligation to repay the debtor in possession loan rockets into the status of a first mortgage, pushing mechanics lien claimants (Perini and its subs) into a second lien position, or even a third lien position if the property is mortgaged.
Mortgage lenders and unpaid contractors and subcontractors howl bloody murder when their liens are pushed into second and third place, but the bankruptcy courts usually ignore those protests.
So watch and see what happens. The people hung out to dry, for a long, long time, will be Perini and its subcontractors. Whatever accounts receivable they have for CityCenter will go unpaid for a long, long time. The key question will be whether Perini and its subcontractors will be willing to continue work and be paid by the debtor in possession loan on a forward going basis, while at the same time having to wait for payment of their accounts receivable which were outstanding prior to the bankruptcy.
If the "kiss and make up" between MGM Mirage and Dubai World does not happen, and their "joint venture agreement" does not allow the filing of a bankruptcy unless both consent, we could see a bankruptcy filing by MGM Mirage's wholly owned subsidiary which is the managing member of CityCenter. A bankruptcy filing at that lever of the LLC ownership structure would be likely to put a complete stop to the lawsuit recently filed by Infinity World, the Dubai World subsidiary which is the actual member in CityCenter Holdings LLC.
I mean, building all those homes everywhere in the desert, creating a new mega city, that's one thing. And it's ok, because people will be living in it. Some of them will be working somewhere, but there will be many retired people from other states moving to Vegas and living here for fun. I think that's understandable. However, the CitiCenter craze with all these super towers all around , that's just madness. And the people who created this mess don't deserve any better than trouble. There is no way that these many condos will not be sold to a high degree, and therfore resulting in bankrupty for MGM Mirage. Perhaps some people are already licking blood and just waiting to buy out these new buildings at a percentage of what it originally cost. The banks will have huge write-offs, and the stock value of MGM Mirage will drop to 5 cents, but a new company will buy these properties and will probably prosper when this "crisis" will be through.
From Switzerland
What a mess.
"kiss and make up" is an interesting way to put it, though correct. MGM Mirage and Infinity World are in this City Center deal 50/50.
SEC form 10-K 03/17/2009 filing lays out their current situation. Without 'paydown' of current debt, availability of more credit is nil. The recent sale of Treasure Island didn't solve the trouble with City Center.
However, MGM Mirage has some major assets. In Las Vegas alone, MGM Mirage owns and operates, Bellagio, MGM Grand, Mandalay Bay, Mirage, Luxor, Excalibur, New York New York, Monte Carlo, Circus Circus and Railroad Pass.
If this article is correct, these folks need $220 mil today, or it's off to bankruptcy. Who knows, maybe something will develop today.
Either way, interests in City Center have been, and will be burned. Using a phrase popular with our government lately "too big to fail" seems appropriate here.
What a mess
you mean, if MGM finds some investor or lender, then the stocks will jack up in late trading? Might be a good idea to jump into the MGM stocks-boat for a few hours then.....
Shutting down CityCenter at this juncture would be a lose-lose proposition. This project should be in the "too big to fail" category.
On another subject, the smear job above on Bob Hamrick is totally without merit. Hamrick is an intelligent, sucessful class act who with his wife Molly run a highly successful business, Coldwell Banker Premier. In my opinion, a more qualified individual to run the CityCenter Broker of Record operation does not exist!
The Broker of Record, Bob Hamrick has broken the law with unfathomable arrogance. The unlicensed activity and sales they committed in the State of California are legion. For anyone to portray him as a paragon of professional and fiduciary virtue is akin to one saying they actually attende the commencent ceremony at which Terri Lanni received his Masters Degree in Business Administration. They perpetrated a MASSIVE FRAUD on everyone. Smear job HA. Lanni and Hamrick are the WMD's that helped implode this pharonic disaster.
LawyerDog is spot on regarding the impact on subcontractors when MGM goes BK. Remember when Sheldon "the Pit Bull" Adelson stuck it to the General Contractor on the Venetian for this and that, and withheld payments? In many states, it's illegal to withhold money to subs who have no direct involvement in a dispute between a GC and the Owner. But that's what happened, because Sheldon's legal eagles found out that Nevada, a third world country clone, had no specific laws regarding non-payments to subcontractors. As a result, many subs settled for less than they were owed, just to try and stay in business. The good times are over, and the Strip, from City Center to Echelon is going to resemble Atlantic City, another place in decline. Sad...
"Smear job HA. Lanni and Hamrick are the WMD's that helped implode this pharonic disaster"
You need to get a life and move on! Sounds like you are more concerned with smearing people than you are the overall success of this important project.
I keep hearing that phrase " too big to fail". That's all well and good, but where's the money coming from? MGM is not making good on the 220mil note due today. There's no money - it's over!
Wake up!
Hey - I am part of a group of unit owners for the property next door to this project - COSMOPOLITAN Resort and Casino. Are you a unit owner and concerned? Join US!! We have filed a class-action to get our hard earned deposits back from this failing project. I am in San Diego. Email me at ruffus327@aol.com. HURRY!
Regards,
Bye Bye MGM, you greedy corporate PIGS!! Hey lets blame the Union it has to be their fault
As to this fellow Hamrick, here's what all of us need to understand.
In California, if you don't have a "Pink Report", you cannot offer newly built condos for sale or take deposits on the sale of those condos. In California, if you don't have a "White Report", you cannot offer newly built condos for sale or actually close escrow on the sale of those condos. Those laws apply regardless of where the condos are located, if you are actively advertising in California or have a sales office in California.
The State of California cannot regulate out of state condos which are not offered for sale in California. Neither can the the State of California forbid or prevent Californians from buying out of state condos.
If a not-in-California condo is advertised in a national publication, be it the Wall Street Journal or in the airline magazine in your seat pocket, all the condo developer or broker has to do is put a notice on the ad that the condo is not qualified for sale in California.
An out of state condo developer or broker cannot "cold mail" or "cold call" Californians concerning not-in-California condos, but if a Californian calls them from California and asks for a sales brochure, it can be mailed into California without violating California law.
If the buyer made an offer to buy a Nevada condo while physically in Nevada, and all of the escrow paperwork and seller's final paperwork are then sent to the buyer in California for signature, that is legally OK as well.
As a result, if Californians COME INTO NEVADA and sign a contract to buy a CityCenter condo, they are stuck with their deal being governed by Nevada law, and they have nothing to complain about in California courts.
I am very puzzled by the claims posted above, concerning the filing of a class action lawsuit in California. Just what, exactly, did this Hamrick and CityCenter do IN CALIFORNIA to sell these condos?
There are not many successful class action law firms in California, but California has its share of young lawyers and stupid two bit hack lawyers who file class action lawsuits without knowing what the heck they are doing, in terms California's very complex real estate laws.
As a result, knowing the exact allegations of what this Hamrick and CityCenter did in California is critical to knowing if there was any wrongdoing by them under California law. I have no connection with either of them, but it's wrong to post stories about them in this forum unless you also post the precise details of what did which is supposedly wrongful.
Actually MGM-Mirage has $600 million in cash from the Ti deal so they can make the payment. But I am hoping they will flop. Spilt up the casinos and sell to smaller companies so employees of MGM-Mirage can work at more than one of the current MGM-Mirage properties.
Good post LawyerDog!Thanks for the objective assessment of the law.
Now that MGMMirage has stepped up to this payment,this important project can continue.
The law suit brought by Dubai World vs MGMMirage certainly appears to be without merit--probably an attempt by Dubai World to aviod further payment on this project, which it cannot afford.
Now, MGMMirage has a basis for a cross suit against Dubai World for breaching its financial contribution obligations under the Partnership Agreement. I would look for such a cross suit as the next move.
Correct "cross suit" to "counter suit"
ctwomp, selling the casinos to independent operators is a great idea, but in this market with tight credit, no company can procure a relatively meager loan to buy half a wing of the Monte Carlo.
Look at TI's savior Phil Ruffin. Part of the purchase was supposed to be financed, I think the figure was $175 million. Despite Mr. Ruffin's stellar rep and background and TI's upside and impressive numbers (the had 100% bookings last weekend and for this weekend the only available rooms are at least $239) not even he can get the money. I'm sure he'll eventually get financing, but the hurdles he's having to vault tells you something.
Houstonjac,
The next move is for MGM to come up with $800 million to complete the remainder of the project.
Sometimes you just need to let things go. No point putting good money after bad.
and.... Why is this project so important? So CityCenter can open and sit empty for the next five years?
Do you honestly see that much demand for condo's and more gaming in Las Vegas?
Mirage secures loan.
Good for Las Vegas, I had a feeling MGM would get some last minute funding.
"rejco" is just another entitled Vegas hater. Ho-hum so tired. Las Vegas isn't being flushed anywhere ... We've survived worse in our past. Move on and point your anger elsewhere.
* * *
And, yes, attacking individuals and companies without proof in this forum amounts to a smear campaign because there is no control of who says what under what name. All of these "reader comment" blogs should be eliminated at best, and at the least, not presented along with reported news as if they have passed the same standards of truth.
One tiny nit pick on the latest version of the Sun's article. MGM Mirage hired Weil Gotshal & Manges for "general counsel purposes"? Not bloodly likely.
Weil Gotshal & Manges is the nation's largest and foremost DEBTOR's bankruptcy law firm, according to articles in American Lawyer and law.com. Weil Gotshal & Manges represents the debtor Lehman Brothers and a host of other big bankrupt corporations.
I guess MGM Mirage is sending its lenders a message that they may be sorry if they push too hard.
Might as well finish the beast.
This kind of stuff scares me. Are we going to survive this madness? For 3 decades people have continuously been screaming we overbuilt.
Maybe this time we did.
Lets hope it's temporary.
Does B_Perini make all that stuff up about Bob Hamrick and Mr. Lanni?
So when do the layoffs arrive? If they have struggled to make 200 m$ payment on an 8.7 billion dollar project; I imagine in about a month were going to see some layoff's followed, probably with a reduction in the amount of people there going to hire, etc.
That's too bad... Las Vegas / Nevada really could use the revenue; over-built or not; the economy will eventually stabalize. And Nevada is the perfect place to be when it does.
By the way, I was interested in the small story in the print edition of the paper yesterday, saying that the Ritz Carlton in Lake Las Vegas had been sold. About 5 minutes poking around on the internet produced the not-so-surprising information that the "buyer" was a subsidiary of Deutsche Bank.
As a result, it's not correct to say the Ritz Carlton was sold. Instead, it was deeded into a lender's subsidiary. Lenders never want to put hotels in their own name because they are afraid of liability arising out of incidents like happened at the original MGM and Hilton in 1980.
The foregoing saga relating to the Ritz Carlton tells us about the likelihood of the mortgage lenders or bond holders foreclosing on any of the strip hotels and being "lucky enough" to sell them. Fat chance. Phil Ruffin said he was buying just one, and his deal already closed.
I think the lenders and institutional bond holders are starting to figure out that being pigheaded about enforcing "loan covenants" is not working out too well for them.
This is just the tip of the iceberg of failures in the construction industry if city and county officials fail to put a moratorium on giving out any new building permits.
Calling everyone names is not going to solve any problems, other than releasing today's frustration for some individuals that are sitting at their computers.
We cannot just slow down new projects, we need to stop them altogether for at least four years.
Shut of the supply and reap the benefits of the demand side of economics in a shorter period of time. Investors will be more willing to take the risk if they knew existing projects will be protected.
All jobs should be tied to prevailing wages. I am not a union contractor, but we need to make sure that all jobs are good paying jobs. Since there will be fewer jobs, we need to make sure these workers will have enough money to help spur the economy not hinder it.
Working on solutions will help Clark County lead the nation out of this downturn... I would rather see the county commissioners spend 800 million tax dollars on protecting this project than 800 million on the tunnel to insert a drain under Lake Mead.
CityCenter needs a new name. How about "Resident Evil: Bailout". The headline for this story should be "Alice throws another billion dollars down a rabbit hole" (Alice is Milla Jovovich's character in "Resident Evil")
"Bye Bye MGM, you greedy corporate PIGS!! Hey lets blame the Union it has to be their fault"
Yes Phil721, MGM MIRAGE is just a bunch of freaking greedy bastages! HOW DARE they take a parking lot and old casino and turn it into 8000 construction jobs and 11000 new casino jobs (12000 - 1000ish? at the old casino). HOW DARE THEY DO THAT! Those greedy greedy people. It would have been better for them not to have hired the construction workers and left that area as a parking lot. The *are* greedy corporate PIGS!!! for hiring all those people.
News Flash: MGM MIRAGE announced today the ill-fated CityCenter project was being renamed "Murrenville" in honor of their CEO and former Wall Street Wiz Kid, Jim Murren who was instrumental in pumping the stock up alongside the big derivative and hedge fund managers. Murren said: "I am pleased and honored, I just wish I could have sold more of my options before we hit the iceberg."