Casino operator MGM Mirage (MGM), Friday said it would provide $200 million of funding to keep the massive CityCenter project going; and that resolved a likely bankruptcy filing. Earlier in the day, the shares of MGM hit a low of $2.51 and temporarily halted on the New York Stock Exchange on pending announcement.
Las Vegas, Nevada-based MGM said that, of the $200 million funding, $100 million should have been provided by Dubai World, its joint venture partner and property developer. MGM noted that the funding is with the authorization of its senior lenders and to satisfy the required sponsor equity contributions, due on or about March 24. The CityCenter with an estimated cost of $8.7 billion is scheduled to open later this year.
The company still requires $800 million in equity contributions to access $1.8 billion credit facility. Further, MGM Mirage revealed its interest to negotiate with Dubai World, its lenders and others for finding a long-term solution to finance the completion of the project.
MGM Mirage reportedly hired law firm Weil, Gotshal & Manges LLP to help in the preparation of filing for Chapter 11 bankruptcy protection. However, the new offer of funding terminated the possibility of bankruptcy filing.
Hurt by the global financial down turn, MGM Mirage was previously struggling to find the required funding for the City center project. At the same time, Infinity World, a subsidiary of Dubai World filed a lawsuit alleging a breach of contract and cost overruns due to mismanagement of MGM Mirage.
MGM Mirage reportedly has $1.27 billion in bond payments due later this year, in addition to about $674 million in existing interest payments. The financial instability had also forced MGM mirage delay the filing of its 2008 annual report. A decline in Las Vegas revenue and tourist flow amid the U.S. recession and a 67% drop in third quarter had also made the matters worse for MGM Mirage.
On its way to resolve the financial instability, MGM Mirage was previously trying to negotiate with a group of lending banks to hand up to $2 billion in liens directly on the company's assets to put the banks ahead of other creditors, largely bondholders, in the event the company filed for bankruptcy protection.
Dubai World had announced earlier this week that its subsidiary Infinity World was suing MGM in the Delaware Chancery Court for allegedly placing the City Center project at risk through committing a breech of its joint venture agreement, following MGM's statement on its 10-k filing that There is substantial doubt about our ability to continue as a going concern. MGM also raised concern over the availability of future borrowings under its senior credit facility, already hurt by more than $13 million in debt.
City Center Holdings LLC owns the project for City Center, a luxury residential, resort and retail complex being developed by MGM on 67 acres between the Bellagio and Monte Carlo resorts on the Las Vegas Strip. The project includes construction plans for several casinos, hotels, a retail strip and other office and residential buildings. City Center Holdings LLC is a joint venture equally owned by MGM and Infinity World.
Infinity World had contributed $4.3 billion to the project and owns 50% of it. The complex has been under construction since 2005. Dubai World also owns about 9.5% of MGM Mirage shares.
Jim Murren, chairman and chief executive officer, MGM Mirage said, 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.
MGM closed Friday's trading at $2.85, down $0.24 or 7.77% on a volume of 16.061 million shares on the NYSE. In the after hours, Stock further lost $0.03 or 1.05%, trading at $2.82.
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