MGM Keeps City Center On Track. $200M payment from MGM Mirage buoys mega-project

28.03.2009, Casino operator secured the month's financial obligations on its glitzy Vegas development, but project's fate is still uncertain.

Construction on CityCenter, the luxurious Las Vegas Strip development project that's jointly owned by Dubai World and MGM Mirage continues for at least another month as lenders bet that MGM would be able to straighten out the financing for the resort and shopping complex.

Lenders allowed MGM to post all of a $200.0 million payment that satisfies the development's March obligations and gives the casino operator time to resolve the project's long-term funding issues.

Amid swirling reports that CityCenter was considering filing for bankruptcy protection if MGM Mirage (nyse: MGM - news - people ) and Dubai World didn't cough up the hundreds of millions needed to satisfy payment obligations due on Friday, MGM Mirage said it was providing the entire funding needed for construction on CityCenter to continue. Dubai World was supposed to pay half of that, but it refused, and MGM needed the approval of its bankers to put up the additional $100.0 million.

Shares of MGM Mirage, which is controlled by billionaire Kirk Kerkorian, surged briefly on the news before falling and closing Friday's trading session down by 24 cents, or 7.8%, at $2.85.

On Monday, Dubai World made it clear that MGM shouldn't count on future payments from the investment company by filing suit against its business partner with the Delaware Chancery Court. Dubai World expressed its disinclination to invest more money into the $8.0 billion project since MGM appears to be in danger of breaching its contract and project costs keep climbing even though CityCenter has been scaled back. (See "MGM's CityCenter Shrinks.") Dubai World asked the court to find that it is "entitled to an order declaring that it is excused from all future performance under the joint venture agreement as a result of MGM's breaches." (See "Dubai World Hedges Its Bets On MGM.")

"We will continue to make every effort to see that CityCenter is completed and becomes an even greater economic driver for the [Las Vegas] region. We appreciate the support of our senior lenders and the CityCenter lending group," said Chairman Jim Murren of MGM. "We continue to review with our partners all possible options to keep CityCenter fully funded on the path to completion."

Although the payment satisfies the month's funding obligations, the development's fate is far from secure. Alan Feldman, MGM's senior vice president of public affairs, said the next payment is scheduled in April.

"With today's funding, the remaining combined equity contributions necessary to access the CityCenter credit facility are approximately $800.0 million," MGM said. The company also 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."

Thomson Reuters contributed to this article. on Forbes.com

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$200M payment from MGM Mirage buoys mega-project
MGM Mirage Inc. threw its $8.7. billion CityCenter casino project in Las Vegas a lifeline Friday, agreeing to make a $200 million equity payment that includes the portion owed by its partner, Dubai World.

The casino giant, which is majority-owned by billionaire Kirk Kerkorian, was allowed to cover Dubai World's obligation under a waiver granted Friday by the project's senior lenders.

The payment buys MGM Mirage (nyse: MGM - news - people ) time to work through a funding crisis amid a slowdown in gambling revenue in Las Vegas.

Some workers were told Friday to pack their tools by the end of the day, but MGM Mirage said the move should allow construction to continue on the hotel, retail, residential and casino complex on the Las Vegas Strip.

CityCenter, in which MGM Mirage and Dubai are equal partners, is to start opening in stages later this year. But its funding remains uncertain.

The partners must contribute $800 million more in equity to access a $1.8 billion credit facility that will complete funding for the project, MGM Mirage said.

"We will continue to make every effort to see that CityCenter is completed," Chief Executive Jim Murren said in a statement. "We continue to review with our partners all possible options to keep CityCenter fully funded and on a path to completion."

Fitch Ratings analyst Michael Paladino said MGM Mirage's move keeps the project afloat for now.

"Now it's back to the negotiating table with the lenders and Dubai World," he said.

Paladino said his "C" corporate credit rating on MGM Mirage, the lowest before a default rating, wasn't likely to improve.

The payment is one of many moves MGM Mirage has made this year to stave off serious financial concern, including finishing the sale of its Treasure Island casino to businessman Phil Ruffin for $775 million last week.

Ratings agencies, its partner in the CityCenter development and securities analysts remain worried about the future of MGM Mirage, which owes more than $13 billion and lost $1.15 billion in the fourth quarter of 2008.

It has struggled for months to secure the financing to finish the CityCenter project, which is providing thousands of construction jobs and is expected to offer 12,000 permanent jobs.

Soon after it reported last week that its auditors doubt its ability to continue as a going concern, MGM Mirage won a waiver from the terms on some of its debt, giving it until May 15 to fix its finances.

But Moody's (nyse: MCO - news - people ) Investors Service quickly lowered MGM Mirage's credit rating because it was only a short-term waiver, and a Dubai World lawyer later said the company might not last through mid-May.

Fitch Ratings downgraded MGM Mirage's Issuer Default Rating several days later to the lowest possible junk rating and wrote in a statement that default seemed inevitable.

And a lawsuit from Dubai World subsidiary Infinity World claims the company's financial condition put the CityCenter project at risk.

Infinity World said MGM Mirage had breached a joint venture contract on CityCenter, and it blamed MGM Mirage for mismanagement and cost overruns on the project.

MGM Mirage officials have said the lawsuit is "completely without merit."

Despite the lawsuit, general counsel George Dalton told reporters Monday that the company wants to see CityCenter completed.

MGM Mirage spokesman Alan Feldman said Dubai World agreed to have its portion of the equity payment due Friday covered. Feldman would not elaborate.

Dubai World has a 9.4 percent stake in MGM Mirage and owns 50 percent of the CityCenter project.

Shares in MGM Mirage dropped 24 cents, or 7.8 percent, to close at $2.85 on Friday after being temporarily halted on the New York Stock Exchange pending an announcement. Earlier in the day, the shares had hit a low of $2.51.

Associated Press Writer Ken Ritter in Las Vegas contributed to this report.

Forbes.com

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MGM Pays Up To Keep CityCenter
Casino operator secures the project's March funding demands from lenders.

The stakes are up for MGM as it faces a $200.0 million payment on the elaborate Las Vegas Strip development project jointly owned by Dubai World and MGM Mirage, andDubai World's lawsuit against MGM alleging contract breaches. But by Friday afternoon, the casino operator came through with a waiver from lenders to fund the development's March payments.

Amid swirling reports that CityCenter was considering filing for bankruptcy protection if MGM Mirage (nyse: MGM - news - people ) and Dubai World didn't cough up the hundreds of millions needed to satisfy payment obligations due on Friday, MGM Mirage said it was providing the $200.0 million of funding needed for construction on CityCenter to continue.

Shares of the company, which is controlled by billionaire Kirk Kerkorian, surged briefly on the news before falling by 17 cents, or 5.5%, to $2.92, during Friday's afternoon trading session.

MGM said funding secured Friday includes $100.0 million that "should have been funded by Dubai World."

On Monday, Dubai World made it clear that MGM shouldn't count on future payments from the investment company by filing suit against its business partner with the Delaware Chancery Court. Dubai World expressed its disinclination to invest more money into the $8.0 billion project since MGM appears to be in danger of breaching its contract and project costs keep climbing even though CityCenter has been scaled back. (See "MGM's CityCenter Shrinks.") Dubai World asked the court to find that it is "entitled to an order declaring that it is excused from all future performance under the joint venture agreement as a result of MGM's breaches." (See "Dubai World Hedges Its Bets On MGM.")

Although the payment satisfies the month's funding obligations, the development's fate is far from secure.

"With today's funding, the remaining combined equity contributions necessary to access the CityCenter credit facility are approximately $800.0 million," MGM said in a statement. The company also 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."

Thomson Reuters contributed to this article.

Forbes.com

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MGM Mirage makes $200 million equity payment
MGM Mirage Inc. says it has made a $200 million equity contribution due Friday to its $8.6 billion CityCenter development on the Las Vegas Strip - including the payment that should have been made by Dubai World.

The company said in a release Friday that the payment should allow construction to continue on the casino, condo and hotel development, which is to start opening later this year.

MGM Mirage (nyse: MGM - news - people ) said $800 million in equity contributions are still necessary to access a credit facility that funds the project.

Forbes.com

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