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MGM Mirage Rides the Waive

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MGM Mirage (NYSE: MGM  ) took yet another step today to repair its debt-laden balance sheet and keep its creditors at bay.

It wants to raise $2.5 billion by issuing stock and senior notes to help chip away at its $14.4 billion in debt. In return, MGM Mirage gets a waiver from lenders for certain covenants and the easing of some restrictions.

The proposed fundraising puts MGM Mirage in the same financing league as Wynn Resorts (Nasdaq: WYNN  ) and Las Vegas Sands (NYSE: LVS  ) , which have romanced investors in recent months.

More future fixes
However, bond and stock deals aren't the only part of MGM Mirage's financial repair effort. It sold one Las Vegas casino/hotel (Treasure Island) for $775 million in March, and other asset sales are a possibility.

The company's latest 10-Q statement, filed a few days before today's announcement, noted that MGM Mirage has granted to lenders security interests for the assets of casino/hotels in Detroit and Tunica, Miss. Today, the company said its proposed $1.5 billion private placement debt offering would be secured by a first priority lien on most assets at its Bellagio and Mirage properties in Las Vegas.

MGM also wants to sell 81 million shares of common stock, hoping for gross proceeds of $1 billion. Kirk Kerkorian's Tracinda, which owns 53.8% of MGM Mirage, will purchase 8.1 million of those new shares. The shares and the senior notes will be used to help pay off part of a senior credit facility, redeem certain notes due in 2017, and purchase some senior notes coming due this year.

It ain't over
The latest financial and asset moves should provide breathing room for the rest of the year, but the story continues. Morningstar points out that MGM Mirage has more than $1 billion coming due next year.

Meanwhile, I wonder if those traders who recently bragged about buying MGM Mirage's stock in the single digits got out of the stock quickly. If they didn't, they took a hit today, as shares are down more than 30% as I write this.

For cautious investors, recent events are like visiting Las Vegas to partake in the buffets and to watch the singers, dancers, comedians, or magicians. You can enjoy the show without gambling.

For more Vegas Foolishness:

Fool contributor Robert Steyer doesn't own shares of any companies cited in this article. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 13, 2009, at 4:14 PM, JerryJohnLigon20 wrote:


    You guys feel happy today after last 3 months lost a lot of money for short-sell hi? You guys got compensate for lost last three months yet? Anti-casino stocks agian with your fooled news hic,hic. I would like to see what shall happen near future.

  • Report this Comment On May 13, 2009, at 5:32 PM, weiwentg wrote:

    Personally, I would put MGM into the 'too hard' bucket. There's a significant chance their creditors won't budge. That would be bad.

  • Report this Comment On May 13, 2009, at 6:08 PM, TMFKopp wrote:

    Nice article Robert, I hadn't caught that part about the lien on Bellagio and Mirage -- that's pretty serious!


    "I would put MGM into the 'too hard' bucket"

    I like your thinking.

    That said, I don't think there's anything wrong with taking out a small position in MGM -- after all, you could be looking at some amazing gains if the company eeks its way through. However, given the ugly balance sheet and reliance on lender kindness to stay alive, it's certainly not one that I'd call a safe, conservative investment.


  • Report this Comment On May 14, 2009, at 8:02 AM, chicky401 wrote:

    They are a casino. I am not sure how they work in Las Vegas but in Atlantic City their creditors would not have much of a choice but to budge. Resorts Atlantic City was facing foreclosure as they hadn't paid their mortgage since October of last year but the creditor was not allowed to foreclose on it without the Casino Control Commissions approval.

    They are a big tax asset to the state. I am sure that MGM's creditors will budge.

  • Report this Comment On May 14, 2009, at 9:49 AM, annaboton wrote:

    Some traders have been buying back to compansate their last three month lost now. They are still seeking for the cheap gaming stocks ......

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