Las Vegas NowNew Problems for MGM and CityCenter Project

New Problems for MGM and CityCenter Project

Late Friday afternoon, MGM Mirage got a waiver to pay Dubai World's half of a $70 million payment in and effort to find a way to keep construction workers employed and open CityCenter on time.

The multi-million dollar debt payment is due Monday. MGM's partner, Dubai World, sued to try to avoid paying the rest of what they owe for the $8.6 billion project. That leaves MGM Mirage looking for another partner to make sure the company can open CityCenter on time and hire 12,000 people.

Sources say if a deal is done, CityCenter would get the funding. One option would have given Colony Capital an ownership foot in the door that financial experts say offered to much control of MGM Mirage.

MGM Mirage is racing against the clock and fighting a deepening recession. The casino giant's crown jewel is at the center of a struggle for the company as well as all of Las Vegas.

Many people look to CityCenter and the 12,000 jobs it would create as a southern Nevada economic stimulus. Company executives are now seeing it as a necessary economic challenge to overcome.

"I think that the priority for MGM Mirage is to open that property -- to do it in a way that does not impair their balance sheet and impact employees," said Deutsche Bank Gaming Analyst Bill Lerner.

Lerner does not expect MGM's partner in CityCenter, Dubai World, to come up with their half of a loan payment due Monday. If MGM extends a waiver with lenders to pay Dubai World's half, construction will continue on CityCenter in the short term.

"There's no question about whether MGM Mirage has the capital to fund $70 million," said Lerner.

Long term experts agree that MGM Mirage needs another partner to cover Dubai World's share. Talks with Colony Capital stalled because sources say one option would allow the private investment firm to convert their $750 million loan into ownership of MGM Mirage. Under that scenario, stockholder Kirk Kerkorian could lose his majority interest and possibly company control.

Economist John Restrepo says any deal in this recession will be uncomfortable for MGM Mirage, "There is probably going to be the giving up for more control. Not to the point Colony Capital wanted, but there will be some giving up of control to get that type of investment."

Sources say there are other partner options. MGM sources say the company is also working on putting a group of four to five smaller companies together to pool money for CityCenter.