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Steve Green

MGM Mirage issues plan that avoids selling Bellagio, Mirage

13 May 2009

LAS VEGAS, Nevada -- MGM Mirage today unleashed a series of financial initiatives aimed at bolstering its balance sheet -- and signaled its Bellagio and Mirage hotel-casinos won't be sold anytime soon.

The hotel-casino and entertainment giant, based in Las Vegas and struggling in the recession to service more than $14 billion in debt, said it will:

--Sell 81 million shares of common stock to the public, with majority shareholder Kirk Kerkorian's Tracinda Corp. planning to buy about 10 percent of those shares. The equity issuance should raise about $1 billion, MGM Mirage said.

--Take on new debt in the form of $1.5 billion in senior secured notes -- bonds secured by the Bellagio and Mirage assets, meaning they couldn't be sold unless other security is designated to back up the bonds.

--Offer to buy back some $1.046 billion in bonds due this July and October, with bondholders receiving a bonus payment if they tender their shares by an early tender deadline of May 27.

MGM Mirage stock opened lower on the news this morning, with the stock offering potentially being dilutive by increasing the number of shares outstanding. The stock traded this morning at $10.48, down $1.92.

Besides retiring the bonds due in July and October, the $2.5 billion raised in the debt and equity issuances would be used to repay at least $750 million outstanding under MGM Mirage's senior credit facility, retire notes due 2017 and for general corporate purposes.

Today's news was not a surprise. After reaching an agreement to finalize construction financing for its $8.5 billion CityCenter project on the Las Vegas Strip, MGM Mirage was expected to focus on debt-reduction measures.

Those measures potentially would involve asset sales, though none were announced today; as well as an equity infusion, a debt exchange, or a swap of debt for assets.

MGM Mirage issues plan that avoids selling Bellagio, Mirage is republished from