MGM pays up for Las Vegas venture

Tom Ashby

  • Last Updated: March 28. 2009 8:30AM UAE / March 28. 2009 4:30AM GMT

The CityCenter project in Las Vegas is to have hotel-condominiums, a casino and a 500,000-sq ft shopping centre. Isaac Brekken / AP Photo

ABU DHABI // MGM Mirage provided US$200 million (Dh734m) in financing to keep on track a huge Las Vegas leisure complex that it is building jointly with Dubai World yesterday, the company said, after days of uncertainty and legal disputes that brought the project near to bankruptcy.

Dubai World had declined to come up with the financing, arguing in a law suit against MGM Mirage that the American company had mismanaged the $8.8 billion project and was unable to foot its side of the bill.

The CityCenter project, which is the biggest privately financed construction in United States history, is meant to be a crowning achievement for MGM Mirage. It stands on a 67-acre site between the Bellagio and Monte Carlo resorts on the Las Vegas Strip with hotel-condominiums, a casino and a 500,000-sqft shopping centre.

It is due to open in December amid a global recession that led to the Las Vegas Strip’s biggest gambling decline on record last year.

“MGM Mirage announced that it is, with the authorization of its senior lenders, providing $200m of funding to CityCenter to satisfy the required sponsor equity contributions due on or about March 24, 2009,” the company said in a statement.

“The funding includes $100m which should have been funded by Dubai World. This allows construction to continue while MGM Mirage seeks additional funding for CityCenter.”

The decision to keep the project solvent came after a week of brinkmanship by both sides.

Dubai World filed a lawsuit against MGM Mirage last week seeking to be freed from further funding obligations for the City-Center project.

Infinity World, a subsidiary of Dubai World, took the action after MGM Mirage allegedly committed a “breach” of its joint venture agreement. Infinity World asked a Delaware court to relieve it of any obligations after MGM stated on March 17 that “there is substantial doubt about our ability to continue as a going concern”.

MGM also said it “cannot provide assurance” that it could generate enough cash flow to pay for its share of the project.

Infinity World, which has already contributed $4.3 billion to CityCenter, said MGM had mismanaged the project, securing much less debt than originally envisaged and allowing costs to rise.

MGM Mirage said in an email statement on March 24 that the lawsuit was without merit.

MGM Mirage said yesterday it intended to work with Dubai World, its lenders and others to find a long-term solution for the financing of CityCenter’s completion.

A $1.8 billion credit facility is due to become available in June, MGM Mirage said.

With yesterday’s funding, the remaining combined equity contributions necessary to access the CityCenter credit facility are approximately $800m, it added.

“MGM Mirage believes that CityCenter is of vital importance to Las Vegas and the state of Nevada,” said Jim Murren, chairman and chief executive of MGM Mirage. “We are doing our utmost to see that this project continues, keeping thousands of
Nevadans employed. We will continue to make every effort to see that CityCenter is completed and becomes an even greater economic driver for the region. We appreciate the support of our senior lenders and the CityCenter lending group. We continue to review with our partners all possible options to keep CityCenter fully funded and on a path to completion.”

Dubai World was not available for comment.

Declining cash flow and the credit freeze left MGM Mirage and Dubai World unable to borrow the money they need to finish the project.

In a March 17 conference call, Mr Murren said he was considering all options, including a combination of asset sales, bond buybacks, fresh secured loans, discounted debt exchanges, and raising new debt or equity to avert bankruptcy. He hired the investment bank Evercore Partners to help with the restructuring.

* with Bloomberg

tashby@thenational.ae

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