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MGM Granted Credit Extension to Fix Financial Structure

No one was really surprised that MGM reported a drop in net earnings during the 1st quarter of the year. On May 9th, 2009, a week after an agreement to salvage the $8.5 billion CityCenter project was reached and the organization was granted an extra 61/2 weeks by its creditors to solve its leverage problems, MGM Mirage Chairman and CEO Jim Murren told company investors that convention cancellations the organization experienced in January and February had dropped off. He added that business levels were stabilizing for the group. In April 2009, hotel room occupancy was on the level with the hotel room occupancy in April 2008. But room rate were down as much as 30% from a year ago.

MGM Mirage CFO (Chief Financial Officer) Dan D'Arrigo said that the group is experiencing more advance hotel booking, a vast improvement from previous months. MGM Mirage reported 1st quarter income of $105.2 million, which translated into profits of thirty-eight cents per share. The results included forty-four cents per share 1 time gain from the $775 million sale of Treasure Island in March.

The results also featured a one-time gain related to the first at the Monte Carlo in January 2008. In the same quarter in 2008, MGM Mirage earned a net income of $118.3 million and forty-cents per share. Gaming analysts expects MGM Mirage to report a net loss of seven cents per share. MGM Mirage's total revenues were $1.5 billion, a drop of 20.2% from $1.88 billion from a year ago. The group announced earnings after the close of trading in the New York Stock Exchange.

Shares of MGM Mirage improved by 20.1% or $1.58, to close at $9.44. MGM Mirage has a long-term debt of $13.5 million and has until June 30th to restructure its finances or risk defaulting that could cause bankruptcy to the company. How MGM Mirage will go about the whole restructuring process has sparked talks on the Wall Street. D'Arrigo said that they are looking at numerous options on how they can fix their finances.

Several market analysts states that they want to see sales of some of MGM assets like deals for MGM Grand Detroit and the Beau Rivage in Biloxi, Mississippi. In acquiring the $1.2 billion needed to finish the CityCenter project, MGM utilized some of its Strip casino facilities to ensure financial support. MGM Mirage recently filed a shelf registration to issue stocks, which enables the group to sell numerous shares.

Gaming analysts from Deutsche Bank said that the cash from the stock sale would help MGM Mirage to pay its debt that will be due in July and October but might also help the company from having to sell its casino and hotel properties. Oppenheimer gaming analysts David Katz stated that selling casino assets would raise money in the short term but affects how Wall Street view MGM Mirage in the long run.

 

Sunday, May 17 , 2009
Victor Copeland