Dubai World may be considering sale of its CityCenter stake


Dubai World, one of the largest investors in MGM Resorts International and a 50 percent owner of CityCenter, may be looking to sell its stake in the casino operator to pay down more than $14.4 billion of bank debt.

Both Reuters and Bloomberg News reported that the investment arm of the Persian Gulf emirate believes it could raise up to $19.4 billion over the next eight years by selling assets.

Dubai World spent more than $5 billion in 2008 to acquire a 50 percent stake in CityCenter and 5.9 percent of the outstanding shares in MGM Resorts. The stock was priced at about $80 a share at the time of the purchase but the market collapse reduced the value by more than 90 percent at one point.

Shares of MGM Resorts have traded from a low of $7.60 to above $16 a share in past 52 weeks on the New York Stock Exchange. On Thursday, shares of the company closed at $9.14, down 25 cents, or 2.66 percent.

Dubai World's ownership stake was surpassed recently by New York-based hedge fund Paulson & Co., which controls 9.5 percent of the company's outstanding shares.

CityCenter, which was built at a cost of $8.5 billion, now has an equity value of $2.65 billion, placing the value of Dubai World's stake at $1.325 billion.

MGM Resorts spokesman Alan Feldman said the company doesn't comment on its investors or other companies.

Analysts speculated that Dubai World could unload its shares of MGM Resorts on the open market. However, the only logical buyer for its stake in CityCenter would be MGM.

"MGM Resorts officials are huge believers in the company as a turnaround story," Macquarie Securities gaming analyst Chad Beynon said. "In that regard, however, I just don't believe the company has the balance sheet to increase its stake in CityCenter and take on that additional debt."

Still, Beynon didn't believe MGM Resorts would allow Dubai World to sell its CityCenter stake to an entity it didn't approve.

"I don't think they would allow someone else to come in," Beynon said. "MGM needs everything in their favor."

Beynon thought Dubai World might try to part with other assets, such as the cruise liner QE2, which it bought for $100 million in 2007.

According to both Bloomberg and Reuters, Dubai World presented a document to its banks during a meeting in July but did not specify what assets the company would place on the market.

According to International Monetary Fund estimates, Dubai and its state-owned companies racked up $109.3 billion of debt through acquisitions and developments that made the emirate a tourism, trade and financial-services hub. About $15.5 billion of that debt is due this year, according to the IMF.

Among its U.S. holdings, Dubai World acquired New York luxury retailer Barneys in 2007 for $942.3 million. Barneys has a store at the Palazzo on the Strip. Dubai World also owns a 20 percent stake in Cirque du Soleil, which operates seven shows on the Strip. Another famous asset owned by Dubai World is Scotland's historic Turnberry golf course.

"These values are quite aggressive even in eight years' time," Andre Andrijanovs, an emerging market credit analyst at Exotix Ltd. in London, told Bloomberg News. "I don't see Dubai World raising this much from real estate."

Dubai World officials declined comment on the reports.

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

 

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