Two Way Hard Three | Las Vegas Casino & Design Blog

February 23, 2009

MGM Mirage and Cosmo in Deutsche Wedding?

Posted by Hunter

Thanks to reader Anthony who pointed out this breaking story... It appears that the rumors may have some truth to them - this has been floating around for a few weeks without any substantiation.

It seems that Deutsche Bank may be looking to extricate themselves from the situation they find themselves in with Cosmopolitan by offering to help finance the rest of MGM's City Center project.


Read archived comments (14 so far)
February 24, 2009 9:05 AM Posted by Mark D

Interesting that Tracinda is using all of Kerkorian's shares in MGMM as collateral on only $600 million in debt. Amazing how far it's fallen and he could lose it all.

February 24, 2009 11:35 AM Posted by Duffman

Let's say MGM comes to own Cosmopolitan, which would probably make sense since they own every other square inch of land on that side of the strip from Flamingo south (except CVS and Jockey). With the fiasco with The Harmon, would the Cosmo become part of City Center or would they operate it as a completely different entity? If you didn't know any better looking at it, you would think that it already is part of CC.

February 24, 2009 12:47 PM Posted by

I agree with Duffman. MGM sure does like to buy up some Vegas Hotels/Casinos. Who knows?

February 24, 2009 2:01 PM Posted by David McKee

I'm not as architecturally literate as most others here but it does look, to the untutored eye, as though the Cosmo is part of CityCenter already. Duffman's point is well-taken. Making it part of the whole project would restore the symmetry lost (at least on the Strip side) by the stump-ification of The Harmon.

OTOH, the better deal for MGM Mirage would be just to run the casino, thereby keeping all the gambling revenue and sparing itself any non-casino headaches. That's assuming Deutsche Bank doesn't charge a usurious lease, as happened when the Hard Rock briefly outsourced its casino management.

February 24, 2009 2:38 PM Posted by Brian Fey

Mark D- You might not realize it, but the entire value of Kirk's stock doesn't even exceed the $600 Million dollars. MGM's market cap is just over 1 Billion dollars, and Kirk owns like 53% of the company, which would put his whole lot of stock only worth about $550-600 million. This same stock was worth about 12 Billion just 18 months ago. Amazing indeed. Since I added about 2k shares to my own MGM position today, I hope City Center works, and I hope MGM comes back stronger than ever. Time will tell. I'm either going to be very happy, or very sad in 5 years. :)

February 24, 2009 3:57 PM Posted by steve_c

This really comes to no suprise to me, but I doubt that MGM/Mirage will make Cosmo apart of the CityCenter campus. From looking at the CityCenter site plan (which also shows Cosmo), MGM would be wise to link both Bellagio and CityCenter with Cosmo with enclosed skybridges across Harmon.

The tram stop at Bellagio is directly west of the Cosmo site, and it could be easily reworked to include access to both Cosmo and Bellagio.

I do wonder about the fate of the Cosmo shopping mall. Would this be a little to redundant for MGM/Mirage given the fact that the Crystals Mall is just south of Cosmo? Or could the Crystals and the Cosmo mall be bridged with access through the Harmon hotel?

Do you think MGM/Mirage will make substantial changes to the interior design and layout?

February 24, 2009 3:59 PM Posted by Hunter

MGM Mirage should just turn the Cosmo condos into employee housing - a perk to get the best employees!

Or maybe create a TV show where the characters live at the Cosmo during the day but at night fight crime.

Or something.

February 24, 2009 8:52 PM Posted by GregoryZephyr

Making Cosmo "part" of City Center is probably irrelevant to whether MGM buys it or just contracts to operate it. Either way, it would be beneficial to combine the operational functions (systems, services, etc.) along with marketing (reservations systems, players club, etc.). Unlike Bellagio or even Monte Carlo, Cosmo hasnt established itself as a distinctive brand and so being part of City Center and the upcoming advertising/PR onslaught would make sense.

February 27, 2009 10:31 AM Posted by Mark D

MGM/Mirage announced today that they are drawing down their remaining credit line. Not a good sign.

"While the move maximizes options, it implies that leverage covenants are either already in breach or likely to be so in the very near future," Bank of America Merrill Lynch analyst Shaun Kelly said in a research note.

March 3, 2009 9:42 AM Posted by Mark D

Extremely negative story about MGM's finances in the Sun today.
They say that Dubai probably won't add any more equity to finish CityCenter, but not mentioned in the story is that, according to several analysts, there is an extremely high risk that Dubai may actually pull out of the deal all together.

March 3, 2009 12:17 PM Posted by Brian Fey

I'm not very smart, because if I were, I wouldn't have bought thousands more shares of MGM just a few weeks ago. But I can't imagine Dubai would just pull out, I would think , they are legally bound and can't just say, see you later, its been fun. I have to think that before you start a partnership based on billions of dollars, there are some very important things that are put in writing, to protect each other, and the various share, and bond holders, not to mention the many many banks that are involved in the lending on the CC project. But again, what do I know? Not much. Right now i'm just hoping Mr. K. still has one more miracle left in him. I just can't imagine, MGM would go bankrupt, with all the assets they own, I'd think they could fine somebody to either loan them more money, or sell some property, so they can secure this deal, and get through this hard time. This is a company that made almost 2 Billion in net profit just a few years ago. They also have funded much of CC with their cash flow. When that thing gets finished, it should be worth, far more than they owe on it, and they still have thousands of condo's left to sell, that will already be paid for, which means that all becomes profit, which can go back to paying down debt. Drastic times call for drastic measures, maybe its time for something as crazy, as Boyd and MGM merge, they could use Boyd's 2 billion in free cash to save the company, and give Boyd major ownership in exchange. Perhaps Penn steps up, and buys Bellagio or Mirage in a last ditch effort to save things. Maybe even, since I'm already dreaming big, Wynn takes 400 million in cash they have in the bank, and buys 50% of MGM. Wynn and Mr. K could be partners. I guess I'm living a pipe dream, but I just can't count MGM down and out just yet, I just think they still have options. Lastly, lets consider this, MGM-Mirage, is the states largest employer, think of the implications, if the state's largest employer filed bankruptcy. I' m not saying it can't happen, but I think that would be the last possible option they would ever take. I think the company has to much respect for Mr. K, to just let him lose his entire net worth over this. And that is basically what this would amount to. If they file, the shares become worthless, and most of his net worth would be gone. To my knowledge, he has no more rights, etc vs me or any shareholder to getting any money back in the event of this happening. Time will tell, and we shall see. I think a year from now, we'll see how things worked out.

March 4, 2009 10:50 PM Posted by Mark D

Looks like the wedding is off.

March 5, 2009 10:30 AM Posted by constructionworker

I am a construction worker at the cosmo. As of March 3rd we were informed that the cosmo is closing down. On March 4th we were told to come in and pick up our checks. The company I work for stated that the cosmo should reopen in one week. Right now there are so many stories about why it closed does anyone know if it will reopen and when? Or why it cloesd down?