MGM Mirage and partner Dubai World late this week reached preliminary agreement on a plan to complete City Center, their jointly owned $8.6 billion Las Vegas project, said people with knowledge of the talks.
The project had looked precarious after Dubai World, the investment arm of the Persian Gulf state, skipped two construction payments on the project worth $135 million, and sued MGM Mirage over allegations of cost overruns and mismanagement of the project.
No documents have been signed in the preliminary agreement, and the terms could change as final details are worked out. The project’s lenders still must approve any agreement the two reach before a deal can be finalized.
City Center’s bank lenders, led by Bank of America, Deutsche Bank, and Royal Bank of Scotland, hold the key to a $1.8 billion loan needed to finish construction on the $8.6 billion resort.
A person close to Dubai World said the two parties are now negotiating with the banks after their week-long talks produced the preliminary agreement. A spokesman for MGM Mirage had no comment.
Details of the agreement were unclear Friday. But a plan proposed last week by Dubai World requested a firm commitment from lenders, MGM Mirage and Dubai World to guarantee all the funds needed to finish the project. It also called for lenders to release the $1.8 billion loan, without first requiring another set of construction payments from the partners.
On Friday, MGM Mirage announced it solely made another construction payment to the project — including Dubai World’s share — for $70 million. MGM Mirage made the last payment of $200 million for both parties.
The payments have put new pressure on MGM Mirage, which is straining under $14 billion in debt and a global consumer recession. The company has warned it could be in default of its loan covenants by mid-May. It received a special waiver from its lenders to let it make Dubai World’s share of the payment Friday. MGM Mirage has said repeatedly it is committed to completing the project.
Another, larger payment is due from both parties by April 29. If an agreement is reached with lenders by then, Dubai World could resume its funding responsibilities.
“We continue to review with our partners all options to keep City Center fully funded,” MGM Mirage Chief Executive Jim Murren said in a statement regarding Friday’s payment. “We are continuing to engage in constructive discussions with our senior lenders and the City Center lending group and we appreciate the support of the involved parties.”
Dubai World is worried that it could lose its $4.3 billion investment in City Center if MGM Mirage is forced into bankruptcy-court protection. Last month, the casino’s auditors expressed doubt about the company’s ability to continue operations.
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