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CityCenter may land in bankruptcy

27 March 2009

LAS VEGAS, Nevada -- The $8.7 billion CityCenter project, billed by MGM Mirage as the most expensive commercial development in U.S. history, could end up in bankruptcy as early as this weekend, some nine months before the project is scheduled to fully open.

The possibility of bankruptcy arose after MGM Mirage was sued earlier this week by its joint-venture partner, Dubai World, which claimed the casino company had mismanaged the 76-acre development, leading to cost overruns. The feuding partners are scheduled to make a reported $220 million payment today on CityCenter.

Earlier this week, MGM Mirage, in a statement about Dubai World's lawsuit, said the company was "ready, willing and able to complete CityCenter, including a required payment this week."

However, The Wall Street Journal reported late Thursday that MGM Mirage's lenders will not let the casino operator make its CityCenter payment unless Dubai World contributes its share.

In its lawsuit, filed Sunday in Delaware Chancery Court, Dubai World said it has concerns about CityCenter's viability. The investment arm of the Persian Gulf state said MGM Mirage's quarterly financial filings last week constituted a breach of the joint-venture pact.

If the payment is not made, CityCenter could be forced to file a Chapter 11 bankruptcy reorganization, possibly by this weekend. MGM Mirage said it hired the worldwide law firm Weil, Gotshal & Manges for general corporate purposes.

Gaming analysts have said MGM Mirage might also have to file a Chapter 11 bankruptcy reorganization as a corporation if it is unable to restructure its $13.5 billion of debt.

CityCenter includes six high-rise towers with a casino, boutique hotels, condominiums, entertainment and a retail mall. MGM Mirage has begun accepting room reservations for the nongaming Vdara, beginning Oct. 1. The project's centerpiece, the 4,004-room Aria, is scheduled to open Dec. 16.

If today's payment is not made, work could stop on the development, which has 8,500 construction workers. Perini Building Co., CityCenter's general contractor, declined comment this week on any talks the company might be having with MGM Mirage.

Southern Nevada Building and Construction Trades Council, which represents 17 affiliated construction unions working on the project, declined comment on talks between the council, Perini and MGM Mirage.

"We're concerned about the jobs, but we don't have any insight or details over what may or may not be going on over there," council spokesman Steve Redlinger said. "Rather than concentrate on what we don't know, we're going to concentrate on what we do know and that is (this) morning our workers are going to be back on the job building that project. If there is other plans in the future, we'll deal with those once they become known."

CityCenter has already begun the process to hire more than 10,000 full-time employees at the development and has accepted some 90,000 applications.

MGM Mirage said Dubai World's lawsuit was "completely without merit" and the joint-venture partner "is well aware of our written commitment to meet our funding obligations and that MGM Mirage has available cash to satisfy those obligations."

CityCenter has grown in cost since it was first announced almost five years ago. But on Thursday, MGM Mirage spokesman Alan Feldman said CityCenter now has a budget of $8.7 billion, reflecting rebid construction costs and a write-down of the delayed Harmon Hotel portion of the development. He said the budget for CityCenter is subject to constant change.

Several sources said Dubai World and the emirate of Dubai have been caught up in the global financial crisis and the entity might not be able to make its portion of the payment due to CityCenter. Last week, Standard & Poor's Rating Services downgraded many of Dubai's companies and warned that the sheikdom's debt payments could triple by 2011.

In 2007, Dubai World spent almost $6 billion for a 50 percent stake in CityCenter and 9.5 percent of MGM Mirage's outstanding shares. Dubai World paid $80 a share for its interest in MGM Mirage, but the company's stock price has fallen dramatically.

Shares of MGM Mirage closed Thursday at $3.09 on the New York Stock Exchange, up 23 cents, or 8.04 percent.

CityCenter may land in bankruptcy is republished from