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Howard Stutz

Gaming officials keep eye on Dubai

2 December 2009

LAS VEGAS, Nevada -- State gaming regulators, who licensed Dubai World last month to share in revenue from the soon-to-open Aria's casino, are closely watching the financial maneuvers of the Persian Gulf emirate's investment arm as it deals with a potential default of some $60 billion in debt.

If there is a change in control of Dubai World, the entity could again be called forward for licensing by Nevada.

Gaming Control Board Chairman Dennis Neilander said the state would have concerns if there is a management shake-up in Dubai World or any of the subsidiaries that were licensed because of the entity's 50 percent ownership in CityCenter.

"We have staff looking at this situation and they are in touch with representatives of the Dubai World subsidiaries," Neilander said. "As far as we know, this is just a reorganization of its debt, but that could change."

Four Dubai World officials, along with two of the company's subsidiaries, were licensed for Aria, the 4,004-room centerpiece hotel-casino at CityCenter that opens Dec. 16. Neilander said gaming regulators would be concerned if there are any changes in that structure.

"Right now, it seems to be just a financial restructuring," Neilander said.

Dubai World said last week it would seek a six-month delay in paying creditors on the nearly $60 billion that owes. The emirate racked up the debt during its own real estate bubble that burst because of the global recession.

Dubai World has been in front of Nevada gaming regulators twice in the past two years, first in 2008 to be approved as an investor for its nearly 10 percent ownership of MGM Mirage, and last month for CityCenter.

Dubai World spent almost $6 billion in August 2007 to acquire half of CityCenter from MGM Mirage and a 9.4 percent stake in the casino operator. However, the investment has decreased dramatically. The entity paid $80 a share for the stock holdings, which closed Tuesday at $11.15. CityCenter, which has a construction budget of $8.5 billion, has been valued at $4.88 billion by an outside evaluator.

Analysts have said CityCenter is not affected by Dubai World's troubles. The project is fully funded, based on a new joint venture agreement drawn up between MGM Mirage and Dubai World last April. No additional payments are required by either side to fund CityCenter, which began opening Tuesday.

MGM Mirage and Dubai World had a near falling out in March when Dubai World sued its partner in an attempt to get out of the CityCenter joint venture. The lawsuit almost caused CityCenter to file for bankruptcy, but the new agreement ended the feud.

William Grounds, president and chief operating officer of Dubai World subsidiary Infinity World, did not mention Dubai World's current troubles nor the issues with MGM Mirage eight months ago when he spoke Tuesday at the ribbon cutting for the Vdara Hotel, the first piece of CityCenter development to open.

Analysts familiar with the agreement between MGM Mirage and Dubai World said the casino operator has the right to grab Dubai World's share of CityCenter, should the entity be forced to sell its stake in the Strip development.

"Should Dubai World look to sell its stake in CityCenter, MGM Mirage would have the right of first refusal, and as we understand it, the last, to buy out Dubai World's stake, especially if it were to be sold at what MGM Mirage would deem to be a fire-sale price," JP Morgan gaming analyst Joe Greff told investors.

Gaming officials keep eye on Dubai is republished from