MGM Mirage puts casino up for sale

Las Vegas, March 16: MGM Mirage’s (NYSE: MGM) ambitious CityCenter project has run into rough weather as the economic downturn has softened the demand for hotel rooms. The Las Vegas-based casino company is, in fact, struggling to retire its debt as gambling activity is also shrinking.

In a bid to shore up its balance sheet, the most-profitable gaming house has put up the city's largest casino, the MGM Grand Detroit, up for sale. Completed in late 2007, the MGM Grand Detroit commands over 40 percent of the gaming revenue. This market share should make it a hot property for potential buyers.

Bill Thompson, an industry expert and professor at the University of Nevada Las Vegas, opined, “Revenues aren't likely to increase soon with consumers pulling back. A sale of a profitable property would fetch the best price and help get some debt off the books."

91-year-old investor Kirk Kerkorian, who controls MGM Mirage, is on the lookout for clinching a deal whereby the lending terms on its unsecured debt can be modified. Sources familiar with the matter said that the company is ready to pledge other casinos as loan collateral with banks. The company is also open to selling more assets to eliminate debt.

MGM Mirage said in an e-mail, “Talks with our financial partners are ongoing. We’re evaluating every possible option and, as we’ve said before, we will explore all serious and credible possibilities.”

The company is neck deep in debt. It deferred its annual report on March 3 and warned that a fall in earnings could result in a $7 billion senior credit facility.

MGM Mirage took on the additional debt to increase its presence in Las Vegas. The ambitious project was to sprawl over 67 acres on the Las Vegas Strip. Four hotels, one of them with more than 4,000 rooms were to be built. An amount of $9 billion on the CityCenter has already been spent to ensure that it is up and running by December.

The company, given its current financial health, has decided to downsize the structure and derive an estimated $200 million saving from the exercise. The earlier planned 49-story building will have only 28 floors now.