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Financing Rules Change for Detroit MGM Plans11 September 2002DETROIT, Michigan – As reported by the Detroit News: "The fallout of Sept. 11 on the travel industry loomed over the latest meeting of Michigan's casino regulator as MGM Grand Detroit explained the financing of its $500 million permanent gambling hall, scheduled to open by January 2006. "Casinos licensed by the Michigan Gaming Control Board must have their debt pacts approved by the regulator. "In the case of MGM Grand Detroit that includes the portion of a $5 billion credit line that publicly traded Las Vegas parent MGM Mirage will tap to build its more lavish Detroit casino. "Before 9-11, creditors were more than willing to lend MGM Mirage $5 billion with no collateral. The caveat: If MGM Mirage lost its investment-grade credit rating -- sinking to junk-bond status -- then lenders could ask that their loans be secured by the properties. "`That's what happened after Sept. 11, when, tragically, leisure travel practically disappeared from the face of this nation for weeks and has yet to come back to normal levels,' James Candler, a Dickinson Wright lawyer representing MGM Grand Detroit, told the five-member board at its August meeting. "…MGM Mirage's bond rating was cut to one notch below investment grade -- triggering `a clause in MGM's global finance agreement that required them to put up collateral,' explained Ben McMakin, deputy licensing director for the board's staff. "MGM creditors include Bank of America, JP Morgan and Wells Fargo; U.S. Bank National Association is collateral agent, holding the assets should MGM Mirage not be able to pay its debt, Candler said. "…Larry Garberding, a retired DTE Energy executive on the board, wanted assurances that Detroit's debt levels would be `reasonable.' "…MGM Grand Detroit owes not a dime on its interim casino, Candler pointed out. Plus, it has money in the bank and has been continuously profitable…" |