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Arnold M. Knightly

Fears of demise fade for MGM Mirage

26 June 2009

LAS VEGAS, Nevada –- Recent financial moves by MGM Mirage have left the company's auditor feeling pretty good about the gaming giant's financial future.

That became evident with the gaming company's Tuesday afternoon filing with the Securities and Exchange Commission announcing "there is no longer substantial doubt (about the company's) ability to continue as a going concern."

The filing sent MGM Mirage shares up 8.05 percent in after hours trading to $6.31 at 5 p.m. PDT on the New York Stock Exchange. Shares closed at $5.84 per share before the announcement.

In its filing, MGM Mirage cited its ability to raise $2.6 billion through a combination of stock sales and bond offerings to help restructure the company's finances as the reason for the filings.

The company said Friday it completed a public offering of 164.5 million shares of common stock at $7 per share, raising nearly $1.1 billion.

The company also has swapped about $1.5 billion in short-term notes for longer-term notes to give it more breathing room.

The stock and bond sales have allowed the company to retire some near-term debt and amend the terms of a senior credit agreement.

The "going-concern" qualification referred to an auditor's assessment in March that the gaming giant, which has seen visitor levels and revenues drop because of the recession, could default on its debt and be forced to file for bankruptcy.

The company, which owns nine casinos along the Strip, reported $14.4 billion in long-term debt on March 31.

The "going-concern" qualification was filed as MGM Mirage was struggling to complete financing for its $8.5 billion CityCenter project.

There were concerns then that the CityCenter project would have to file for bankruptcy because its partner, Dubai World, had stopped funding its share of the project and had sued MGM Mirage.

When MGM Mirage and Dubai World resolved their dispute and completed arrangements to finance the Strip project, the gaming company was able to turn its focus to resolving financial problems with the company itself.

The auditor's assessment comes about a week after MGM Mirage's top executive pulled back from previous comments that the company could sell additional properties along the Strip to raise cash.

Chief Executive Officer Jim Murren told Bloomberg News on June 17 that the offers it was getting for its casinos were too low.

"We don't feel like we could come close to what we believe the values are worth," Murren told Bloomberg News. "The multiples are low, it seems like the wrong time."

The company could still sell three properties elsewhere, such as the MGM Grand Detroit, the Beau Rivage in Biloxi, Miss., and the Gold Strike in Tunica, Miss., he said.

The company sold the Treasure Island for $775 million in March to former New Frontier owner Phil Ruffin.

Fears of demise fade for MGM Mirage is republished from