It looks as though the lion can sleep soundly in Macau and Las Vegas after all—for the time being – following a decision by MGM MIRAGE’s senior lenders to provide USD200 million funding to cover immediate credit needs.
The company, which has an equity holding in MGM Grand Macau via a 50:50 deal with Pansy Ho, saw its share price perk up at the news. The cash should enable MGM MIRAGE to honour the current deadlines on debt covenants on its CityCenter project in Las Vegas. Structural issues remain, though, for MGM MIRAGE’s balance sheet.
Half the USD200 million facility announced is for contingencies to cover funding that MGM had hoped was already in the bag, namely a USD100 million contribution from Dubai World, the investment vehicle of the Gulf emirate’s sovereign wealth fund. No one is saying publicly that Dubai World has scaled down its role or even pulled out of funding CityCenter, but if things have got to the stage of organising contingency funding to cover its contribution, the prospects for Dubai World’s future involvement don’t look too good.
It’s also worth bearing in mind that despite the welcome sticking plaster of the current USD200 facility, MGM MIRAGE is still likely to need one or more new long-term equity partners if it is to get out of the financial jungle. Colony Capital, the private equity company that took Station Casinos private in 2007 (though without great success) recently had talks with MGM MIRAGE, but pulled out just before Easter.
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