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City Center operators seek new loans to refinance debt

1 October 2013

LAS VEGAS -- The operators of CityCenter are seeking new loans to refinance the four-year-old Strip development’s nearly $2 billion of long-term debt.

MGM Resorts International, which owns 50 percent of CityCenter and operates the 66-acre complex, has scheduled lender meetings in New York City to explore options to refinance the debt on the development.

“This is an opportunity to extend the debt maturities at lower rates thereby improving City Center’s free cash flow,” MGM Resorts Chief Financial Officer Dan D’Arrigo said in a statement emailed by the company’s corporate communications office.

MGM Resorts also reportedly is no longer interested in selling the Crystals retail component of CityCenter.

According to Bloomberg News, CityCenter has $1.8 billion of debt, including $1.14 billion in bonds that expire in 2016 and $708 million of obligations that come due in 2017.

During a meeting with investors at last week’s Global Gaming Expo in Las Vegas, MGM Resorts officials said the company wanted to address CityCenter’s debt. MGM Resorts owns the development in a joint venture with Dubai World, the investment arm of the Persian Gulf emirate.

RBC Capital Markets gaming analyst John Kempf said MGM Resorts wasn’t providing many details about the meetings, but he thought lenders might be open to making some changes.

“The real key to the transaction is that we expect the covenants of the new loan to be less restrictive than the bond covenants, which may allow dividends to be distributed from CityCenter to MGM and Dubai Holdings,” Kempf told investors.

CityCenter’s centerpiece is the 4,004-room Aria. The project also includes the nongaming Vdara and Mandarin Oriental hotels, the all-residential Veer Towers and the Crystals retail, dining and entertainment mall.

CityCenter was built at a cost of $8.5 billion — the most expensive and ambitious development to have ever taken place on the Strip. The recession reduced land values, and the challenge of selling high-rise condominiums in a depressed real estate market drove down the development’s value.

Construction defects caused one of the project’s elements, the Harmon Hotel, to stop being built midway through development. The tower is now embroiled in a construction defects lawsuit, and a Clark County judge has given CityCenter operators approval to demolish the unfinished building.

In quarterly earnings conference calls this year, MGM Resorts officials said they were weighing offers to sell Crystals. However, during G2E, D’Arrigo was quoted in interviews as saying the mall was no longer on the market. Crystals is 85 percent occupied. Kempf told investors during G2E that MGM Resorts believes it can fill vacant spaces and increase the mall’s revenues.

Also, according to Kempf, MGM Resorts would like to take full ownership of Aria.

“MGM has yet to have conversations with Dubai World in regards to its intent to sell,” Kempf said.
City Center operators seek new loans to refinance debt is republished from