Deal Seals Full Financing For CityCenter
Dubai World, MGM Mirage agree on reworked joint-venture pact that ensures project's completion.
By Adam Kirby, Associate Editor -- Hotels, 5/31/2009 11:00:00 PM
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The future of the massive CityCenter Las Vegas project looked bleak through March and April—highlighted by one-half of the joint venture suing the other over questions of financial viability—but not only will CityCenter be completed, it may even open on time late this year.
On April 30, CityCenter partners MGM Mirage and Dubai World reached an agreement with the project's lenders on a plan to fully fund the completion of CityCenter for its scheduled December opening.
Dubai World and MGM will fund remaining equity contributions to CityCenter through letters of credit, and lenders have fully funded the entire US$1.8 billion senior secured credit facility that had been outstanding. “All of the money is literally in the bank now,” says Alan Feldman, MGM senior vice president of public affairs. “No matter what happens to Dubai World or MGM Mirage, CityCenter gets built.”
MGM is responsible for construction cost overruns that exceed CityCenter's current budget of US$8.5 billion; the company posted its Circus Circus Las Vegas, as well as undeveloped adjacent land, as collateral to secure any necessary additional funds.
Dubai World will fund its original sponsor contributions to CityCenter, including US$135 million in payments previously paid by MGM on Dubai World's behalf. Had MGM not stepped up to make those payments back in March, the whole project—and perhaps MGM itself—might have collapsed. “CityCenter would have filed for bankruptcy,” Feldman says. “At one point, we were literally 30 minutes away from having to do so.”
Also under the revised joint-venture agreement, Dubai World agreed to dismiss a lawsuit filed in March against MGM that accused the company of breaching the initial joint-venture agreement due to questions over liquidity and ability to continue as a going concern.
Aside from previous changes to The Harmon Hotel & Spa resulting from building errors by the general contractor, no significant alterations have been made to the CityCenter project scope.
In May, MGM raised US$2.5 billion in capital that will be used to refinance outstanding debt. About US$1 billion of that came from a public stock offering of 81 million shares, 10% of which was acquired by Kirk Kerkorian's Tracinda Corp. The other US$1.5 billion comes from private placement of senior notes.
The company also amended a senior credit agreement, allowing it to waive any potential default arising from “going concern” questions. As of March, MGM had US$14.4 billion in debt on its books.
In the weeks before final CityCenter funding was secured, MGM reportedly hired Morgan Stanley to shop assets—specifically MGM Grand Detroit and Biloxi Beau Rivage, Mississippi. Feldman denies that the company is currently actively shopping any assets.
Numerous credible buyers have approached the company about acquiring assets, Feldman says, and legitimate offers will be explored. “We're not giving these away—there's not a tag sale going on,” he says. “We have no shortage of calls or inquiries. I can assure you, there have been plenty of people who have expressed interest.”
In April, Steve Wynn expressed interest in reacquiring Bellagio, which he previously owned prior to selling Mirage Resorts. Similarly, Phil Ruffin has said he would be interested in buying The Mirage, which shares a Las Vegas Strip campus with his newly acquired Treasure Island Hotel and Casino.
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