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Best of Howard Stutz

Gaming Guru

Howard Stutz

Moody's upgrades view on CityCenter

10 January 2012

LAS VEGAS, Nevada -- CityCenter bonds are looking like a better bet, according to investment adviser Moody's.

Moody's upgraded its view of CityCenter's roughly $1.5 billion of debt Monday, saying the prospects of increased visitation to Las Vegas this year helps the 67-acre, multiple development Strip complex.

CityCenter Aria Resort & Casino , anchored by the 4,004-room Aria hotel-casino, is 50-50 owned by MGM Resorts International and Dubai World, the investment arm of the Persian Gulf emirate. MGM Resorts manages the venture.

Moody's in a note to investors said modest economic growth and higher corporate profits are likely to support rising visitation and convention attendance in 2012.

"Moody's expects the company's (cash flow) can reach a level that can support its cash interest burden and a significant portion of its maintenance capital expenditures by year-end 2012," Moody's gaming analyst Peggy Holloway said in the report.

CityCenter was built at a cost of $8.5 billion. The project opened in December 2009 after more than five years of design and construction. In August 2010 its equity value was written down to $2.65 billion. Total debt on the project was $1.99 billion as of Sept. 30.

The change in Moody's rating's outlook reflects the development's better-than-expected operating performance through the 2011 third quarter. CityCenter produced roughly $1.1 billion in revenue in the 12 months ended Sept. 30.

Moody's believes the project, which includes nongaming hotels Vdara and Mandarin Oriental, the all-residential Veer Towers and the Crystals retail, dining and entertainment complex, could continue to deliver increased revenues in line with the growth and visitation for all Strip hotels, casinos and conventions.

MGM Resorts is expected to report fourth-quarter financial results next month.

Through October , Las Vegas' annual visitation was up 4.5 percent while group attendance rose 9.8 percent. For the nine months ended Sept. 30, occupancy at Aria improved to 87 percent with the hotel increasing average daily room rates to $201.

"While Aria's occupancy and average daily room rate still lags other luxury properties on the Las Vegas Strip, we expect the property can narrow the gap as it continues to build brand awareness and ramp up operations," Holloway said.

Moody's said it could upgrade CityCenter's rating if the Las Vegas market continues to improve or if the property builds up cash to bolster liquidity.

The investment service upgraded $900 million in 7.625 percent, senior secured first lien bonds that come due in 2016 to B1 from B2. The ratings service affirmed its view of CityCenter's $600 million in 10.75 percent, senior secured second lien notes that come due 2017 at Caa2, but reduced the probability of a default.

Shares of MGM Resorts closed at $11.32 on the New York Stock Exchange Monday, up 19 cents, or 1.71 percent.
Moody's upgrades view on CityCenter is republished from