Two Way Hard Three | Las Vegas Casino & Design Blog

March 26, 2009

When The Fun Stops: City Center May File Chapter 11

Posted by Hunter

Sources are telling the Las Vegas Sun that City Center may be forced to file Chapter 11 bankruptcy tomorrow, if they miss an important financial payment.

This is also being covered by the WSJ:

NOTE: This isn't a filing for MGM Mirage, just City Center LLC.

We'll see what happens here. It is unclear if MGM Mirage would be allowed to make the Dubai World part of the payment if they wanted to and if they did, it might not be in their interest to do so, even if they had the cash.

At this point, both companies are positioning themselves in a legal pissing contest for control of the project.


Read archived comments (35 so far)
March 26, 2009 10:11 PM Posted by Anthony

I wonder what the "future" condo owners have to say about all this?

March 27, 2009 5:05 AM Posted by Ken

I bet that the future condo owners are going to be taking a pass on their closings. In fact, it would not surprise me to see a massive class action suit if they do not refund the deposits in total.

This situation, in conjunction with 2006 prices, makes the condos at citycenter untenible.

Stay tuned, it wiill be interesting.

March 27, 2009 6:31 AM Posted by Brian Fey

You know me, always trying to put a positive spin on things but....
MGM-Mirage was a great, profitable company before CC. If they did walk away, and lost the land, and their billion dollar investment, and it left the balance of the company untouched, would it be the end of the world? If its true, MGM has only put in 1 Billion so far, + land, and Dubai, had invested 4.5 Billion, I wonder if MGM is just testing the water, and trying to play poker if you will against Dubai. I mean MGM can go on as a viable company without CC. Dubai, has much more on the table to lose. I don't know how this is structured, but If CC filed, and all parties walked away, MGM could use their cash to pay down other debts, and life could go on? As big as City Center is, lets not forget, its still only has one casino.

March 27, 2009 8:20 AM Posted by NavinR

Surprisingly, MGM stock is only down 11% ($0.34) so far today. Thanks, Hunter, for the differentiation between CC LLC and MGM. I wonder what this will mean for MGM as it currently exists--I envision MGM selling assets to service the CC debt load, and completing it in pieces (as it should have been built in the first place!).

March 27, 2009 10:48 AM Posted by Mark D

Bloomberg is reporting that MGM is trying to make the payment without Dubai.

March 27, 2009 11:34 AM Posted by Mark D

MGM has received a waiver to make the entire March payment without Dubai.

March 27, 2009 11:34 AM Posted by Anthony

MGM Mirage is going to make payment

March 27, 2009 11:59 AM Posted by Brian Fey

We live to breath for yet another day. Damn, MGM you had me scared there for second.

March 27, 2009 1:25 PM Posted by Anthony

James Murren sends letter out to employees

March 27, 2009 6:08 PM Posted by Steve Friess

hunter -- love the headline. made me laugh out loud. re: condos and lawsuits. as an owner at panorama, which was completed more than a year late, i can assure you that there are contingencies in those contracts that indicate that the completion date can change. also, the lawsuits against mgm re: signature and trump aren't going to go anywhere. those folks can walk away from their 20 percent deposits, tis true.

also, i dont think that mgm is only in it for $1b. i'm quite sure they're in it for a whole lot more than that. i believe they've been putting in in equal portions with Dubai, hence today's crisis.

March 27, 2009 6:10 PM Posted by Brian Fey

So far, Jim Murren seems like a class act, I feel pretty comfortable with him at the helm. I realize he's kind of like Obama, he's having do deal with the hand he was dealt from the people before him, but this letter, and just the way he has handled this situation thus far, and the conference call, I just think he is very capable of the job he has before him. I'm not saying MGM can't fail, because he can only do so much, but I'd rather have him there, than Terri at this point.

March 27, 2009 7:18 PM Posted by mike_ch

Is MGM filing? This showed up on today's NBC-3 story before the payment was made:

Update: The Wall Street Journal reports that MGM-Mirage has hired a bankruptcy attorney and that a filing could come as early as this weekend. That would put the project on hold and put thousands of current and future jobs in limbo.

Is this for MGM itself or are Channel 3 just late to the party on the CityCenter Corp? I did a little searching around and couldn't find anything, but I thought I'd share because I know there's some WSJ fans here.

March 27, 2009 7:23 PM Posted by mike_ch

The more I look at it, the more I think Ch3 just got the facts mixed up.

Perhaps it just seemed more likely what with MGM kicking the can of CityCenter payments down the road.

March 27, 2009 9:57 PM Posted by Arthur

Looks like MGM has averted another wall going to that "finish line" of theirs this late in the game.

They stated that $800 million more are required to access a fund for CityCenter. Lets hope they can get Dubai World to get on board again before they waste any more money.

March 27, 2009 10:49 PM Posted by Mark D

According to Bloomberg, MGM Mirage hired Weil Gotshal & Manges LLP as "restructuring counsel". There are ways to "restructure" without going bankrupt. They're probably next going to try and get a debt exchange with their bond holders, that and sell another resort or two.

March 28, 2009 5:50 AM Posted by detroit1051

Question for locals: What material and color is the exterior finish of Crystals? In the photo in this NY Times story, the edges facing the Strip look flat white to me. I had (incorrectly?) assumed it would all be glass. Does it look better in the flesh?

March 28, 2009 6:07 AM Posted by Brian Fey

Detroit - I think its like a aluminum or stainless steel look with glass. I assume they were going after the look of the front of most of the Apple Stores. I haven't seen the facade in person in a while, but I think its more of a silver color, like the new macbooks.

March 28, 2009 9:30 AM Posted by Mark D

it's a cheap-looking flat white color.

March 28, 2009 9:51 AM Posted by Hunter

Yeah Detroit, I said the same thing when I was there earlier this month. It looks pretty cheap so far.

March 28, 2009 2:08 PM Posted by g

Could the "cheap white" look be a protective covering on the metal/aluminum?
Like on a stainless steel fridge out of the box. That's my guess!

The comments above do not express my view on the City Center Project! Wynn Resorts forever!!! =)

March 28, 2009 11:19 PM Posted by mike_ch

Somebody here compared Crystals to a Liebskind structure of the same name in Toronto, and so I took a trip there and got pictures and quizzed the locals about what they thought of the structure (they hated it.)

Having seen both, CityCenter's does seem a bit cheaper, but to me it's not the steel so much as the glass. The steel so far is flat, the Toronto building looks like it's paneled, however the glass in the Toronto building has thick black frames and lots of little rectangular shaped windows criss-crossing around the steel part of the building (not for the best of the museum inside, many of the windows have black curtains covering the light inside so as to not fade or damage the museum pieces with light.)

The CityCenter crystals has none of this. The glass appears to practically float in air, it has no real frame, it looks very thin.

Maybe it'll look better as more of the building is filled in, but even though I'm no Leonard Stern to my architectural eye the Vegas crystal looks almost fragile or something compared to it's predecessor. As a mall goes, I would prefer the look of the original building if I had to pick. Unfortunately, the original was placed next to a very old stately looking museum like some kind of alien cancer. So really neither of them are that appealing.

April 3, 2009 4:55 PM Posted by Anthony

James Packer of Crown Ltd maybe interested in City Center

April 4, 2009 5:55 AM Posted by detroit1051

Wall Street Journal reports MGM is getting close to selling MGM Grand Detroit and Beau Rivage. I'm grateful to MGM for investing in Detroit when the city is on the verge of collapse...and Detroit has been very profitable for them.

"MGM Mirage has hired Morgan Stanley to handle the potential sales of two of its steadiest cash cows — MGM Grand Detroit and Biloxi's Beau Rivage casino — according to people with knowledge of the matter....
Industry analysts said a sale of the two casinos — which have held up well even as Las Vegas has seen a sharp decline in revenues — might bring anywhere from $1 to $2 billion, providing major relief to the struggling company."

April 4, 2009 12:18 PM Posted by Jeff in OKC

Couldn't read the whole article from this link, hopefully Hunter can tell us a way to get to it. From what I could read, however, I am skeptical. Recent articles say that Casinos have, for the past few years been selling at 10-12 times earnings. However, Phil Ruffin couldn't get 25% of Treasure Island financed, even thought he had the money, had good credit, and he bought it at 7 times earnings. My point being any buyer would just about have to pay cash, and I think MGM would want a premiun for the properties that may no longer reflect the current economy. My understanding is they are fabulous properties in not so fabulous areas that lack the sex appeal of Las Vegas. I just don't know who'd want to spend a couple billion to be a regional, or bigger regional, company. I imagine someone would, but who?

April 5, 2009 6:41 PM Posted by Art

Just came across this development...

April 6, 2009 10:42 AM Posted by Mark D

New York Times is reporting that Colony might invest directly in MGM Mirage instead of just the CityCenter project.

April 6, 2009 8:07 PM Posted by parchedearth

I have a theory about these investment rumors and don't want to be seen as a conspiracy theorist, but they all started the last couple days of March. I think the Colony rumors may have just been a desperate attempt to up MGM's stock price so that they could meet their capital requirement covenants on their debt which could have triggered on April 1. I think it also benefited Colony with their Station situation. This seemed to work so well that LVS is now playing the same game with the rumor about restarting Macau with an investment from the contractors. Of course as long as these remain rumors, this can only buy them a couple months before people catch on. These companies are already on the verge of bankruptcy and might try anything to avoid losing control of the companies. At best, it will take several months for a sale to close, and I don't think MGM has that kind of time. I should also add that I think Boyd's offer for Stations was also a diversion. Some are also suggesting that Packer pulled out of Cannery because of money issues and not his sister's fear of a background check.

MGM is also giving significant room discounts for later this year, but you have to pay now to make the reservations. They could be moving up all revenue to make their current cash flow look better. Again, this could be a disaster after a few months if things don't improve.

On a positive note, I was in Vegas this weekend and the Palms and Hard Rock looked pretty busy. I think people are starting to adjust to the 15% drop in revenue on the strip.

April 6, 2009 8:10 PM Posted by Hunter

I haven't looked at MGM's debt structure in detail but I don't think your theory should be dismissed out of hand - at least in some form.

These things do happen in some circumstances so it's not a totally crazy thing to suggest.

April 9, 2009 8:47 PM Posted by detroit1051

Colony Capital no longer talking with MGM. Now what?

April 13, 2009 4:32 AM Posted by detroit1051

"Doing The Math on Possible Sale of MGM Assets":
LV Sun has an interesting story on whether MGM will sell properties, including comments on Wynn's interest in Bellagio.

April 26, 2009 7:22 PM Posted by detroit1051

I've read and re-read the RJ's article which alleges unresolved construction deficiencies at CityCenter and don't find much substantive information. It looks like the RJ is trying to create a story where none may exist. Yes, all deficiencies must be corrected, and both MGM and Perini say they will be. It's not as if the deficiiencies are being deliberately hidden. Stories like this add another potential reason fo condo buyers to get out of their conracts.

April 26, 2009 8:12 PM Posted by Hunter

Totally agree - there's no story here. The RJ is trying to take advantage of the CC mess to drive hits on their Web site.

April 27, 2009 10:14 AM Posted by Jeff in OKC

What I think the R-J was especially weak in explaining, either intentionally or unintentionally, was the size of the project. When they mention hundreds of reports, it sounds like a problem, until you realize that this is the largest building project in history. It would have been better, IMO, if their consultants had given them some perspective relative to size.

April 27, 2009 12:27 PM Posted by mike_ch

My question about this is, how does Perini ever expect to find work again after all of this? CC was obviously supposed to be the highlight of their portfolio, but their work has caused some people to lose confidence in it.