MGM Resorts announces note sale to refinance portion of CityCenter debt


The operators of the year-old CityCenter development proceeded Monday with a plan to refinance a portion of the project's debt.

MGM Resorts International, which owns the 67-acre Strip complex in a 50-50 partnership with Dubai World, the investment arm of the Persian Gulf emirate, said the developers had offered $1.1 billion in private placement notes.

In a statement, MGM Resorts said the net proceeds from the offer would be used to reduce debt under an existing credit agreement while extending the maturity of the remaining loans by four years.

Jefferies & Co. gaming analyst David Katz told investors MGM Resorts had been saying the company was working on efforts to restructure some of CityCenter's financial structure.

"MGM's announcement that it is replacing a portion of CityCenter's existing credit facility and extending the remainder of it should further reduce the financial risk in the story, presumably at a cost," Katz said in a research note. "We believe the longer-term prospects for CityCenter should improve as the Las Vegas market recovers."

Union Gaming Group principal Bill Lerner said the move would relieve both MGM Resorts and Dubai World from any obligation to invest their own capital into the CityCenter joint venture to extend due dates or amend the credit agreements.

"We suspect that some of the original lenders may have chosen to use this opportunity to exit positions in the CityCenter credit," Lerner said. "We view this combination of a private placement and amendment and restatement of the credit facility as a positive for MGM Resorts."

CityCenter, which includes the 4,004-room Aria hotel-casino, nongaming boutique hotels, residential high-rise buildings, and a retail, dining and entertainment complex, was built at a cost of $8.5 billion. The project opened in December 2009 after more than five years of design and construction.

In August, the equity value of CityCenter was written down to $2.65 billion.

In November, MGM Resorts said CityCenter had net revenues of $413 million during the third quarter and cash flow of $52.4 million, the development's first positive quarter after losing money during its first six months.

Aria, the development's centerpiece, had net revenues of $219 million and cash flow of $41 million during that same three-month period.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

 

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