With the economic situation still worsening around the world, one of the largest corporations involved in the Las Vegas economy is facing potential bankruptcy with its current loan balances.
MGM Mirage Inc., which has not filed an earnings statement since last September, said on Tuesday that it is in the position of possibly defaulting on loans that were made for its latest project, the $8.6 billion CityCenter in Las Vegas. The company, owned by 91-year-old billionaire investor Kirk Kerkorian, stated in an unscheduled filing with the Securities and Exchange Commission (SEC) that, unless the economic situation turned around quickly and traffic returns to its casinos, MGM Mirage would break many of its loan agreements this year.
The purpose of their filing with the SEC was to delay submitting its annual report until March 17th because it is still assessing its financial position and liquidity needs. One reason for this delay was MGM Mirage management’s decision last week to tap $842 million of its $4.5 billion senior revolving credit agreement to cover general expenses. MGM Chief Executive Officer Jim Murren, who only took over as the head of the organization late last year, has said the company is looking into several other deals around the world in which MGM Mirage would brand its name and experience in the gaming world in order to earn revenue.
In another attempt to raise funds, MGM Mirage sold its Treasure Island property to businessman Phil Ruffin and is also looking at selling nearly 300 acres of land in Nevada and Atlantic City. Even with these property sales and revenue streams, MGM Mirage still is looking at raising another $1.2 billion to finish CityCenter on the Las Vegas Strip. The project is a joint venture of MGM Mirage and Dubai World subsidiary Infinity World Development Corporation. The property, which would house hotels, a casino, condos, and retail space, has been called the largest privately financed project in American history.
The company’s stock has dropped precipitously over the past few months. As recently as December, the MGM Mirage stock traded as high as nearly $14 a share. At press time, the stock of MGM Mirage is trading at $1.81. It can be found on the New York Stock Exchange under the symbol “MGM.”
The woes of the Las Vegas Strip over the past few months have been well-documented. The CEO of Las Vegas Sands Corporation, Sheldon Anderson, recently put almost $500 million into his corporation in December to resolve liquidity issues. The company also raised over $2 billion in revenue beyond this through selling common and preferred stock.
After its third quarter financial report filed last month revealed a $129.7 million net loss – versus a net profit of $244.4 million a year earlier – fellow Las Vegas casino property Harrah’s decided to relieve some of its immediate debt through the refinancing of bonds that were due within the next couple of years. On November 14th of last year, Harrah’s exchanged the existing short-term debt for debt with a later exchange time and rate. This was able to push off approximately $4 billion of the privately-held company’s debt.
Boyd Gaming also has faced issues from the current economic situation. Revenues for the company, which owns the Orleans, Gold Coast, and Sam’s Town, dipped to $426.5 million – a 13% decrease compared with $490.1 million in the same period last year. Third-quarter net income dropped to $8.7 million, 73% less than the $31.9 million made over the same period last year.
