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VIDEOMGM Mirage: House Loses, Creditors Win?
By
Scott Reeves Mar 23, 2009 2:45 pm
Brief scrutiny of today's headlines.
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Dubai World’s Infinity unit, MGM’s partner in the project, asked the Delaware Chancery Court to relieve it of obligations under a joint-venture deal.
Earlier this month, MGM Mirage said auditors questioned its ability to continue as a going concern, as travelers and gamblers cut back during the recession.
In a federal filing last week, MGM Mirage said it can’t be sure about meeting future payments on CityCenter. Dubai World says this constitutes a breach of its joint-venture agreement with MGM Mirage, and has filed suit to protect its investment.
Dubai World’s Infinity unit has contributed about $4.3 billion to the $8.7 billion project. MGM and Dubai World have to come up with $500 million before they’re able to tap $1.8 billion from banks in May.
Billionaire investor Kirk Kekorian holds a majority stake in MGM Mirage. The company didn’t immediately respond to Reuters when asked to comment on the lawsuit.
Last week, MGM Mirage said banks had agreed to waive debt covenants through May 15. But according to Reuters, Fitch cut MGM's debt rating to "C," today, down from "CCC," and said it was "unable to give an outlook because of the debt's high level of risk."
Las Vegas has long been Never-Never Land. Building a major city in the desert and supplying it with water was just a minor engineering problem. But the economic crunch is a reality that even a city built on glitz can’t escape.
For more on the joys of gambling, check out Hoofy & Boo's always astute report.
No positions in stocks mentioned.
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