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Best of Howard Stutz

Gaming Guru

Howard Stutz

Group trying to force MGM into bankruptcy

17 April 2009

LAS VEGAS, Nevada -- The former owner of the Stratosphere and a large investor in Cannery Casinos are reportedly trying to force MGM Mirage into bankruptcy.

The Wall Street Journal on Thursday said that corporate raider Carl Icahn and private equity fund Oaktree Capital Management have purchased large amounts of MGM Mirage's corporate bonds in hopes of forcing the Strip casino giant into filing for bankruptcy to restructure the company's $13.5 billion debt.

The newspaper cited sources familiar with the matter.

MGM Mirage is under pressure from its lenders to come up with a solution for its liquidity issues. In March, lenders gave the company a stay until May 15 to meet covenants on its debt obligations. MGM Mirage executives have said in filings with the Securities and Exchange Commission that the company could be forced into bankruptcy if it can't reach a solution on its debt obligations.

MGM Mirage spokesman Alan Feldman couldn't comment directly on the Icahn-Oaktree reports, saying the company is continuing "constructive" discussions with its lenders.

Icahn, a billionaire financier, sold the Stratosphere, two Arizona Charlie's casinos and the Aquarius in Laughlin for $1.2 billion in February 2008.

A woman answering the phone at his office at Icahn Enterprises said, "Only Carl Icahn can speak to the media on behalf of the company."

Nicole Adrien, director of investor relations for Oaktree, which owns 42 percent of Cannery Casinos, said she couldn't confirm whether the private equity group had made any MGM Mirage bond purchases.

Sources told the newspaper that Icahn and Oaktree have told MGM Mirage officials that bankruptcy is the company's best option.

Gaming Control Board Chairman Dennis Neilander said the agency doesn't track bond purchases and there aren't requirements for casino companies to report debt acquisitions. However, gaming regulators could ask company officials for a list of their bondholders.

If the control board were concerned that debtholders were trying to exert control over management, Neilander said, the agency has the ability to call the parties forward for licensing.

MGM Mirage is facing battles on two fronts -- about its huge corporate debt and about its feud with Dubai World, its 50-50 joint venture partner in the $8.7 billion CityCenter over financing the massive project.

MGM Mirage is expected to make a $70 million equity payment on CityCenter today. The payment includes the 50 percent share owed by Dubai World.

The investment arm of the Persian Gulf emirate sued its partner last month over CityCenter, questioning the viability of the development and accusing MGM Mirage of mismanaging the project's construction, which has led to cost overruns.

On the corporate side, MGM Mirage officially put the company's resorts in Detroit and Biloxi, Miss., on the market this month, hiring Wall Street investment firm Morgan Stanley to evaluate sales offers for the two casinos.

Analysts believe selling the MGM Grand Detroit and the Beau Rivage could fetch the company between $1.5 billion and $2 billion, which would help MGM Mirage resolve some of the company's liquidity issues.

One gaming analyst believes MGM Mirage is under pressure from its lenders to sell the two resorts.

Group trying to force MGM into bankruptcy is republished from