MGM Mirage Renegotiates Debt as Means to Further Borrowing
MGM Mirage has been suspected by financial analysts of being undercapitalized in the ever-shrinking credit market, putting the company in danger of not being able to acquire the funds to complete its CityCenter project.
Now the casino industry giant has acted, renegotiating terms on an existing loan agreement to avoid breaking the credit covenant and damage its chances for future financing.
The $7 billion dollar credit facility was amended to allow a greater leverage ratio, change pricing levels, and modify definitions of terms and limitations regarding secured debt.
The move follows Las Vegas Sands billionaire Sheldon Adelson's loan of almost a half-billion dollars to his own company, to stay in line with credit agreements on leverage ratio.
MGM Mirage also announced the first phase of financing for its Dubai-partnered condo-hotel-casino-resort complex, CityCenter, had been obtained through a $1.8 billion loan, to mature in 2013. The amount was less than expected for initial funding.
Stock for the casino operator followed market trends today, plunging at first before a late recovery of some losses. The stock finished at $19.00 a share, off $2.00.
Even though the new arrangement gives MGM increased liquidity, some analysts are worried the company will use the chance to get even further into debt. Boyd Gaming was rewarded by investors for having the discipline to shut down its Echelon Casino project.
Perhaps MGM Mirage needs to consider suspending CityCenter and concentrate on returning to a healthy financial state, before borrowing more money to chase what it already owes.
