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LAS VEGAS, Nevada -- Even with a two-month reprieve from its lenders, MGM Mirage won't be able to weave its way through its current financial situation without the help of a bankruptcy court, Wall Street believes.
The Strip casino giant bought itself until May 15 to come up with a restructuring plan covering at least $7 billion of its $13.5 billion in long-term debt. Analysts aren't sure a solution can be found in 60 days.
"While MGM Mirage may be able to pull the proverbial rabbit out of the hat and avoid bankruptcy, we see few alternatives that would produce meaningful value for common shareholders," Susquehanna gaming analyst Robert LaFleur told investors Wednesday.
MGM Mirage eased some investor concerns, saying its lenders waived requirements that it be in compliance with its senior credit facility covenants until May 15.
However, the company, which operates 10 Strip hotel-casinos and is building the $9.1 billion CityCenter, said in a filing with the Securities and Exchange Commission that it wouldn't have been in compliance with covenants as of March 31. Outside auditors raised "substantial doubt" about the company's ability to continue.
Goldman Sachs gaming analyst Steven Kent said MGM Mirage will probably need more time to work out a restructuring arrangement with its lenders beyond the 60-day waiver.
MGM Mirage told investors its first-quarter results may be weaker than the fourth quarter. The company lost $1.15 billion in the quarter, including a noncash impairment charge of $1.2 billion.
"It seems MGM Mirage will require covenant relief beyond that point," Kent said in a research note. "For MGM it seems that investor hopes for a positive quick resolution is unlikely."
Shares of MGM Mirage, which have fallen from a 52-week high of $64.85 a year ago and an all-time high of nearly $100 per share in October 2007, showed little reaction Wednesday to the previous day's announcement. The company revealed its waiver and earnings after the markets closed.
On the New York Stock Exchange, MGM Mirage closed at $2.87, down 16 cents, or 5.28 percent.
MGM Mirage Chairman and Chief Executive Officer Jim Murren said the 60-day extension is what the company sought. He hinted the company might seek a second extension if issues can't be resolved beyond May 15.
"This bank group has grown and suffered with us," Murren said. "They helped build MGM Mirage. The time frame helps create a sense of determination and focus. You can't accomplish this in a week, and a six-month or eight-month time frame doesn't address the seriousness of the matter."
Murren said MGM Mirage will look at numerous ways to restructure its total debt of $13.5 billion, either through exchanging debt for equity in the company's casinos, modifying and extending existing debt, or by selling some of the company's casinos.
Evercore Partners, a corporate restructuring adviser, was retained by MGM Mirage to work with its lenders in soliciting interest from potential casino buyers. In addition to Bellagio, The Mirage, Mandalay Bay and New York-New York on the Strip, MGM Mirage operates the MGM Grand Detroit and the Beau Rivage on Biloxi, Miss.
Some analysts suggest the company sell one of the nongaming components of CityCenter, such as the Vdara Tower.
The company's $775 million sale of the Treasure Island to Phil Ruffin is expected to close by the end of the month, adding some much-needed cash to the company's books.
Murren said the company has received interest from buyers for individual casinos and groups of casinos. Still, any sales, while garnering headlines, will just be a piece of the overall restructuring package.
"The most important job we have right now is to work with our advisers and come up with a long-term capital structure for the company that is durable during this recession and beyond," Murren said.
The company is still seeking $1.2 billion to complete CityCenter, which it owns in a 50-50 partnership with Dubai World, the investment arm of the Persian Gulf state.
Company executives said Tuesday it would probably cost MGM Mirage more money if it were to slow construction of CityCenter, rather than complete it. CityCenter is scheduled to open by the end of the year.
The Harmon Hotel component of CityCenter was delayed until 2010 while its luxury condominium portion was eliminated from the project.
Stifel Nicolaus gaming analyst Steve Wieczynski said MGM Mirage and its lenders may work on any solutions possible in order to stay away from having a judge make any restructuring decisions.
"MGM Mirage's banking consortium is giving the company flexibility regarding covenants and deadlines," Wieczynski said. "We still believe lenders will try to avoid a technical default as they do not want to go through the bankruptcy process."
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