MGM Mirage says it may default on debt

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MGM Mirage says it may default on debt


LAS VEGAS - MGM Mirage Inc, the gambling company of billionaire investor Kirk Kerkorian, said Tuesday that it may default on its debt amid development of its biggest casino project ever, the US$8.6 billion CityCentre in Las Vegas.
Unless the economy turns around and more people start gambling again, the Las Vegas-based casino company believes it will break its loan agreements this year, it said in a filing with the Securities and Exchange Commission.
That would mean a default on its senior credit facility, which it says it has asked to modify.
MGM Mirage will delay filing its annual report until March 17 because it is still assessing its financial position and liquidity needs, the company said in Tuesday's unscheduled filing. One factor in the delay, the company reported, was its decision last week to tap US$842 million of its US$4.5 billion senior revolving credit agreement to cover general expenses.
As of the end September 2008, MGM Mirage had US$13.29 billion in long-term debt.
Many US casino companies borrowed huge sums in the last few years to develop resorts in the United States and abroad. But several are having trouble making payments on that debt because their revenue has fallen sharply over the past year as fewer patrons have spent less money on gambling and services.
Chief executive Jim Murren, who took over late last year, has said the company is exploring a half-dozen deals around the world in which MGM Mirage would lend its name and expertise to generate income.
It sold the Treasure Island casino on the Las Vegas Strip to Kansas billionaire Phil Ruffin for US$775 million and has since been shopping other properties, including nearly 300 acres of land in Nevada and Atlantic City, New Jersey, and two airplanes.
MGM Mirage has not reported on its financial position since September or posted its earnings for the quarter that ended Dec 31.
The March 17 report is to include an auditor's assessment of whether MGM Mirage can continue as a company.
Shares of MGM Mirage dropped 30 cents, 11.5 per cent, in trading after hours Tuesday. It ended the regular trading day at US$2.62, down 43 cents from its previous close, 96 per cent below its highest close in the last year, of US$64.73 last March 25.
Between that peak and Tuesday, the 91-year-old Mr Kerkorian's majority stake in the company shrank in value from US$9.6 billion to US$390 million.
MGM Mirage's profit during the first three quarters of 2008 fell 59 per cent compared with the same period in 2007, from US$712.21 million to US$292.7 million.
Mr Kerkorian's Tracinda Corp, based in Beverly Hills, California, also holds stakes in Ford Motor Co and Delta Petroleum Corp.
Tracinda sold part of its stake in Ford in October, taking millions of dollars in losses. Mr Kerkorian, a longtime casino and hotel developer, has a mixed track record with the other two major US automakers, including an unsuccessful US$4.5 billion cash offer for Chrysler last year and his push for General Motors Corp. to form an alliance with Nissan Motor Co. and Renault SA in 2006.
Tracinda also was Chrysler's largest shareholder at the time of its 1998 combination with Daimler-Benz. -- AP