MGM Mirage credit draw sends shares, bonds lower
Fri Feb 27, 2009
LOS ANGELES, Feb 27 (Reuters) – Casino operator MGM Mirage said on
Friday it had drawn down the remaining $842 million of its revolving
credit facility, raising fears that the Las Vegas-based company is
close to violating debt restrictions.
MGM shares dropped 14.8 percent to $3.79 on the New York Stock Exchange early
Friday afternoon. MGM’s 7.5 pct notes due in 2016 fell to 40.5 cents on the
dollar from about 45 cents on Thursday, according to MarketAxess. Its 6.625
pct notes due in 2015 fell about 7 cents to 39 cents.
"While the move maximizes options, it implies that leverage covenants are
either already in breach or likely to be so in the very near future," Bank of
America Merrill Lynch analyst Shaun Kelly said in a research note.
MGM, a major holding of billionaire Kirk Kerkorian’s Tracinda Corp, has been
hit hard by slower consumer spending and stalled credit markets, which have
prevented the casino operator from finalizing funding for its massive
CityCenter project on the Las Vegas Strip.
The company cited continued instability in global financial markets and the
uncertain state of the global economy as motivating factors behind the
drawdown.
Kelly estimated that, with the latest draw, MGM would end the first quarter
with a total debt of $14.5 billion to $15 billion, depending on whether or not
there were debt repurchases in the 2008 fourth quarter or earlier this year.
MGM has not yet announced when it plans to release its fourth-quarter
results. (Reporting by Deena Beasley; Additional reporting by Dena Aubin in New
York; Editing by Richard Chang)