MGM Resorts (NYSE: MGM) will likely be joining its casino brethren in launching a Macau IPO, cashing in on gaming's biggest market. This will be the third Macau IPO after Wynn Resorts (Nasdaq: WYNN) and Las Vegas Sands (NYSE: LVS) sold shares last year to reduce debt. But this one could be just another desperate attempt to lower the debt threatening MGM's very existence.

A tad more than $13 billion of long-term debt was on MGM's balance sheet at the end of the quarter, much of it because of the ill-timed CityCenter project. At a time when Wynn and Las Vegas Sands have been reducing leverage by paying down debt, MGM has been in a holding pattern as results in Las Vegas continue to struggle.


2Q 2010 Long-Term Debt

2Q 2009 Long-Term Debt

Change in Debt

MGM Resorts

$13.05 billion

$12.98 billion


Las Vegas Sands

$9.83 billion

$10.64 billion


Wynn Resorts

$3.23 billion

$4.12 billion


Source: SEC filings.

The foundation of problems at MGM were laid years ago when it focused on finishing City Center in Las Vegas while Las Vegas Sands, Wynn and Melco Crown (Nasdaq: MPEL) were expanding in fast growing Asia. Those three have enjoyed vastly improved results this year as Chinese visitors gamble more and more each year.

Last year MGM sold Treasure Island and is attempting to sell its stake in Borgata Resort & Casino in Atlantic City to please state regulators. If MGM keeps selling, eventually there will be no properties left to generate cash and pay for the debt piling up. The Macau IPO is expected to raise up to $500 million, a drop in a $13 billion bucket for MGM.

In coming quarters, MGM Resorts has a lot to prove to investors by reducing debt and getting Las Vegas operations back on solid footing. Count me as a skeptic staying far away from MGM's shares until I see a lot of improvement.

What do you think about the future of MGM? Leave your comments below.

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