MGM Mirage Needs To Deal

05.03.2009, Absent gamblers threaten its ability to service its debt absent an agreement with creditors.

MGM Mirage might be facing default, but it would take a certain kind of bad luck for billionaire majority stakeholder investor Kirk Kerkorian to let that happen.

MGM Mirage (nyse: MGM - news - people ) shares nosedived to a multi-year of $1.89 early Wednesday before rebounding some, to $2.21, still down 15.7%, or 441 cents, a day after the casino operator said it would delay filing its annual report and may default on its financial covenants in 2009. The stock has lost 96.5% from its year-ago price of $60.25.

Several brokerage firms downgraded or revised price targets for MGM on Wednesday, after the casino and hotel operator said late Tuesday it may not comply with certain loan covenants in 2009 unless the economy improved and people started gambling more. In its filing to the Securities and Exchange Commission, MGM also said it would delay filing its report because it was still assessing its financial position and liquidity needs.

The casino industry has been struggling as Americans have been less willing to take risks with their money amid job cuts, tight credit, a housing downturn and a bear market on Wall Street.

MGM Mirage, the owner of 10 Las Vegas Strip hotels, including the Bellagio and Mandalay Bay, incited investor fears last week after saying it had drawn down the remaining $842.0 million of its revolving credit facility.

The worry is that the casino's debts are rising at a time that its income is falling, which could cause it to breach a promise to bondholders to maintain a minimum ratio of earnings to debt. If MGM were to breach that covenant, bondholders could accelerate its debt, and, if it couldn't repay its borrowings, the company could be forced into bankruptcy proceedings.

While MGM is in talks to amend its covenants, UBS analyst Robin Farley predicts a "going concern" statement will probably be included in the delayed annual report. A going- concern qualification refers to a company's ability to continue to operate indefinitely.

In November, rival Las Vegas Sands (nyse: LVS - news - people ) included going-concern language in its financials, only to remove it after the casino operator received a $2.1 billion capital infusion with help from its billionaire majority shareholder Sheldon Adelson. (See “Adelson Antes Up For Sands” and “Sands Solid For Now.”)

Kerkorian seems to be in the same boat; his 53.8% equity stake in MGM would almost certainly become worthless in bankruptcy, as would the 9.4% owned by Dubai World. So it would be in their interests to bail the company out or help renegotiate its debt, which stood at $13.3 billion at the end of the third quarter.

On Wednesday, Keybanc downgraded MGM, a major holding of Dubai World and Kerkorian’s Tracinda, to “hold,” while Citigroup rates it “sell” and cut its price target on the stock to 60 cents from $2.50, saying it expects trends in Las Vegas to deteriorate. Barclays Capital trimmed its price target on the stock to $3.00 from $4.00.

Thomson Reuters contributed to this article.

MGM Resorts International (NYSE: MGM) ist ein globales Unterhaltungsunternehmen des S&P 500 mit nationalen und internationalen Standorten, das erstklassige Hotels und Casinos, hochmoderne Tagungs- und Konferenzräume, unglaubliche Live- und Theaterunterhaltungserlebnisse bietet und eine umfangreiche Auswahl an Restaurants, Nachtleben und Einzelhandelsangeboten.

Das MGM Resorts-Portfolio umfasst 29 einzigartige Hotel- und Destination-Gaming- Angebote, darunter einige der bekanntesten Resort-Marken der Branche.

Wir betreiben ein Portfolio von Resorts in Las Vegas, darunter Bellagio, MGM Grand, Mandalay Bay und The Mirage, The Signature, Excalibur, Luxor, New York-New York, Park MGM und weitere. In Las Vegas haben wir auch eine bedeutende Beteiligung an CityCenter, dem legendären Hotel, Kongress-, Einzelhandels- und Restaurantkomplex im Herzen des Las Vegas Strip mit ARIA Resort und Casino und Vdara Hotel und Spa, Crystals Retail und Veer Eigentumswohnungen.

Das Unternehmen expandierte in den USA und auf der ganzen Welt und erwarb kürzlich den Betrieb des Empire City Casino in New York und des Hard Rock Rocksino in Ohio, das in MGM Northfield Park umbenannt wurde.

Im Jahr 2018 eröffneten MGM Resorts MGM Springfield in Massachusetts, MGM COTAI in Macau und das erste Hotel der Marke Bellagio in Shanghai.

Die über 80.000 Mitarbeiter von MGM Resorts weltweit sind stolz darauf, dass ihr Unternehmen als eines der weltweit am meisten bewunderten Unternehmen des FORTUNE Magazine anerkannt wurde.

		
 
Weitere Nachrichten der Gaming-Branche