Two Way Hard Three | Las Vegas Casino & Design Blog

May 13, 2009

MGM Mirage Plans Offering to Reduce Debt

Posted by Hunter

MGM Mirage has proposed issuing some new debt and equity to raise up to $2.5 billion. Proceeds would be used to pay off other debts.

Part of the package would includes liens against Bellagio and The Mirage which translates into MGM not selling those places anytime soon.


Read archived comments (17 so far)
May 13, 2009 8:43 AM Posted by Brian Fey

I obviously already posted comments about this subject in the open topic area, before this post was up, but I think this is good news long term. I was never in favor of MGM selling off assets,and while they still could, the pressure is off for a while now. If there is anyplace MGM should sell assets its in LV, where they already have way too many assets, and I think they are realizing that now. But to sell Bellagio or Mirage, made no sense in the long run. Its just like Venetian selling off the shopping centers in their hotels, it looks great short term, but not so great at all long term. I knew MGM had many options, and really issuing more stock, was inevitable. The problem was, they could not do it at $1.80 a share, they had to get the price up to a somewhat reasonable level, though its still undervalued, the low teens, is much more realistic, than $1.80. In 3-5 years, I don't think much of this will matter, the economy will be much better, and MGM stock will be much much higher.

May 13, 2009 9:40 AM Posted by Dave

So Bellagio, Mirage, and Circus Circus are off the block. We've already heard that MGM Grand won't be sold. So what's still available? I don't see Monte Carlo or NY-NY moving, so that leaves the Mandalay Mile.

Is the Great Deconsolidation Sweepstakes of 2009 a bust? One casino--Treasure Island--out of ten MGM Mirage properties has changed hands. None out of the eight Harrah's properties has been sold. Has the window of opportunity closed?

May 13, 2009 9:45 AM Posted by Hunter


That will certainly be a topic we'll discuss on the podcast, which I believe we'll do next week.

I'm gonna give it some more thought before then but my feeling now is that it may have... at least with regards to MGM Mirage. Harrah's might still be forced to sell something but it sounds like MGM bolstered their bankroll enough to survive until things (hopefully) get better.

May 13, 2009 10:32 AM Posted by parchedearth

I agree this gets them past the near term issues. Execution on CC is the next hurdle.

I also want to see if they can really get $2.5B. The current stock price drop already indicates only $810M. We need to see if they can sell all $1.5B in notes and at what interest rate. The new notes may actually increase their cashflow needs.

It also looks like Mandalay mile is the only property left which can now be sold, by virtue of being unburdened.

May 13, 2009 11:39 AM Posted by mike_ch

I think we will have to wait and see.

MGM's struggling has been to finish building CityCenter. Once it's open they're going to have to operate it, and five star service is expensive. Especially so if you have two large hotels offering it. Wynn does too, but Wynn and Encore together aren't that many more rooms than Bellagio alone.

May 13, 2009 3:27 PM Posted by Andy S

I dont think MGM are out of the woods yet, the share price fell below $9 today.

When MGM were working out the financing for City Center did they factor in room rates/occupency and condo sales based on the current economic conditions?

They have a huge amount of debt and I think sales are still probable, looks like it would be the Mandalay Mile to go.

Interesting to see what happens.

May 13, 2009 4:16 PM Posted by David McKee

Has the Green Monster itself already been pledged as collateral? MGM can still borrow against Beau Rivage, in addition to the Mandalay Mile. Then there's always Slots A Fun ...

May 13, 2009 5:10 PM Posted by Dave

On a note related to Andy's post, I've finally finished the 2004-2008 mini-analysis of Nevada gaming revenues. I don't have room rates in there, but you can see that the state has been steadily cutting back its gaming positions, even before the downturn. There's basically less of everything besides bacc and poker tables than there was five years ago. Does this have implications for adding more supply? I think so.

May 14, 2009 12:00 AM Posted by o00000

Andy, it's interesting you bring that up since MGM just announced they are raising room rates across their properties due to higher demand. I personally think the demand was a result of the low room rates, but we'll see how it plays out. I went to LV in January for a 3 day weekend because Wynn was so cheap. I wouldn't have bothered if it was pre 2008 prices. I don't want to be a conspiracy theorist, but I'm sure a few in MGM see this announcement as the beginning of a strategy to try to inch prices up a bit to justify their desired rates at CityCenter. I think that's the issue MGM doesn't want to talk about: CityCenter was built with $200+ room rates and $500,000+ condos in mind. It's going to take ALOT longer than they care to talk about to recoup their costs on this place. Even if demand stays steady and room rates stay off their bottom from earlier this year, with Cosmo and FB coming online they will still have to compete hard to be the hottest and newest place in town.

May 14, 2009 9:25 AM Posted by Jeff in OKC

McKee's comment makes me realize what an opportunity we have, and here is my humble, yet brilliant, suggestion. I believe quick action is of the essence.
I am coming to Las Vegas tomorrow evening, through Tuesday evening (5/15 to 5/19). Since Slots A Fun may be available, I suggest we form a gaming company to be named VegasGang Gaming (VGG, we could pronounce it "vig") for the purpose of buying this property from MGM. My personal commitment includes, but is not limited to, 45 shares of MGM stock, a genuine 1983 lobby poster from the movie Silkwood, 5 copies of the Incredible Hulk #337, a very nice pair of VEGAS.COM underpants, and a Hughes Resort Hotels matchbook from the Sands Casino. I am willing to negoiate for VGG in this matter, if someone can get me Mr. Murrens cell phone number. Of course, we want to do as much of the phone work as possible while we are in Las Vegas, so we won't run up a bunch of long distance charges. Who else is with me!?!?

May 14, 2009 10:18 AM Posted by billyinlasvegas

I think Lady Luck might be a better buy, but count me in for Slots-A-Fun.
They had an EBITDA of 2.8M last year!

May 15, 2009 8:23 AM Posted by Las Vegas USA

I think many businesses are just getting frantic to bring in money wherever they can right now and making short term decisions.

May 16, 2009 4:06 PM Posted by Brian FEY

I realize this will not be a product designed or owned by MGM, probably more like the Foxwoods thing, they would be a partner, but more of a management company for the project, but either this has made very little news, or else I just missed it.

May 16, 2009 6:46 PM Posted by detroit1051

Brian, you'll be a winner if either MGM or Wynn gets selected. My money is on MGM-Peebles. Peebles seems to have a lot of supporters.

May 16, 2009 7:27 PM Posted by Brian Fey

Is Wynn even in the hunt? I knew he had been listed personally, not Wynn Resorts, with something up in this area, either this or another project. But that's been a while, and see no mention of him here either. I'm surprised this hasn't gotten more press. This project could be very destructive to Sands Beth. Project, I would think, because its much closer to the action I believe. It could be very lucrative indeed for whoever is involved.

May 27, 2009 9:48 AM Posted by mike_ch

Harrah's is now doing something very similar:

May 27, 2009 1:19 PM Posted by Mark D

Possible Genting purchase of MGM Macau.