MGM Mirage issues bonds backed by casino

MGM Mirage issued $750 million of senior secured notes Friday, guaranteed by the company's New York-New York casino.

The notes, which are due 2013 and available through a private offering, will have a 15 percent yield to the buyer while MGM Mirage will pay 13 percent interest.

In a statement, MGM Mirage said the proceeds will be used to lower outstanding borrowings under an existing revolving credit agreement and for general corporate purposes.

The offering is set to close on Nov. 14.

Reuters News Service quoted several analysts as saying the MGM Mirage offering was a sign the frozen U.S. corporate bond market was thawing.

"It'll be interesting to see how that one goes, if it does reasonably well, we could see others coming out of the woodwork too," said John Tierney, credit strategist at Deutsche Bank in New York.

Before the financial crisis took hold in September, between $80 billion and $100 billion of issuance was expected in September and October, according to Scott MacDonald, director of research at Aladdin Capital in Stamford, Conn.

"If (MGM Mirage gets) the full deal done, it will be a boost to getting that market moving again," MacDonald said.

Stifel Nicolaus gaming analyst Steven Wieczynski, who follows MGM Mirage, said the company still needs to raise about $1.2 billion to complete the $9.1 billion CityCenter development. During its earnings conference call this week, the company said approximately $500 million is already promised through signed commitment letters but not finalized, leaving $700 million still to be funded.

MGM Mirage and its CityCenter joint-venture partner, Dubai World, each pledged $1.9 billion to fund any final costs to the project.

"The company has proven it can manage through a downturn by cutting costs, securing financing, and improving the customer experience," Wieczynski said in a note to investors. "This management team has the ability to get the company through this tough stretch while maintaining and even increasing market share."

Wieczynski thought MGM Mirage's cost-cutting efforts could reach $1 billion.

Shares of MGM Mirage closed at $16.46 on the New York Stock Exchange Friday, up $1.09, or 7.09 percent.

Reuters News Service contributed to this report. Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.