MGM Mirage: Partners Wanted

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When reality overtakes ambition in the casino business, it's time to seek more investors.

Having engaged in debt renegotiations with lenders, sold stock, and issued new debt, MGM Mirage (NYSE: MGM) is now considering taking on partners or some alternative source of financing.

Old friends, new partners
On Tuesday, its largest shareholder, Kirk Kerkorian, said his Tracinda Corp. is "exploring the possibility of strategic partnerships or other alternatives" because there is "substantial unrecognized value" in the company.

Kerkorian, who owns 37% of MGM Mirage's stock, issued his remarks in a brief filing with the Securities and Exchange Commission. Any move would come after MGM Mirage opens its CityCenter resort, retail, residential and casino complex in Las Vegas; it's due for an unveiling in mid-December.

Speaking of the CityCenter development, MGM Mirage said Tuesday it would take a $955 million pre-tax, non-cash impairment charge for the quarter that ended Sept. 30. The charge relates primarily to a recent decision by MGM Mirage and its joint venture partner, Infinity World Development, to discount prices of its residential inventory by 30% in the CityCenter project.

Additionally, the joint venture will take a $348 million non-cash charge for residential real estate under development, causing MGM Mirage to record a net pre-tax charge of approximately $200 million. The company will issue third-quarter results on Nov. 5.

Join the club
If MGM Mirage takes on partners and/or new investors, it will just represent the next step among its peers in coping with too much debt and too much expansion during a recession.

Wynn Resorts (Nasdaq: WYNN) recently issued stock for 25% of its Macau casino business in an initial public offering on the Hong Kong Stock Exchange. Las Vegas Sands (NYSE: LVS) may launch its own Macau-related IPO next month. Both have tapped debt and equity markets to patch up their finances.

Meanwhile, MGM Mirage is also considering an IPO for its joint-venture casino resort complex in Macau. Last week, the company's CEO Jim Murren told Bloomberg News that an IPO is an "attractive option," adding that he is assessing expansion in Macau.

At age 92, Kerkorian may decide that it's time to reduce some unwanted excitement in his life, and not move further with MGM. Then again, considering its current $11 share price, investing in a company whose stock was trading in the low $90s just two years ago might present too much excitement for any investor.