MGM Resorts raises $511 million through stock sale

MGM Resorts International said Tuesday it raised $511 million through a stock offering that was announced a week ago and plans to use the funds to pay down its $13 billion debt.

The Las Vegas-based company sold 40.9 million shares of common stock on the New York Stock Exchange. The stock was priced at $12.65 per share.

In addition, Los Angeles billionaire Kirk Kerkorian, the company's founder and largest shareholder, sold almost 28 million shares of MGM Resorts through Tracinda, his privately held investment arm. The company did not receive any proceeds from the sale of Kerkorian's shares.

The sale left Kerkorian with 135.3 million shares, which reduces the 93-year-old billionaire's ownership stake to roughly 30 percent.

Analysts had expressed concern that Kerkorian's stock sale reflected negatively on MGM Resorts and the gaming industry.

MGM Resorts also plans to use the sale of a 50 percent stake in Atlantic City's Borgata and other means to pay down debt.

Credit Suisse gaming analyst Joel Simkins said the company's debt issues and challenges in Las Vegas, where MGM Resorts operates 10 Strip hotel-casinos, including the CityCenter development, are primary reasons he initiated coverage with a "neutral" rating. He said the company's Las Vegas casinos account for approximately 80 percent of all company cash flow.

"While we take the view that this capital raise will help to alleviate pressure on MGM Resorts and continue to help the company buy time for a consistent Las Vegas recovery to materialize, MGM still has a mountain of debt to dig out from and may need to serially raise equity," Simkins told investors.

MGM Resorts and Tracinda each granted the underwriter of the stock sale a 30-day option to purchase up to an additional 6.1 million and 4.2 million shares, respectively, to cover any overallotments.

MGM Resorts is looking at other ways to pay down debt.

The company is expected to pick up a little more than $250 million from the sale of its 50 percent ownership in the Borgata. Once that sale is completed, the company will add $114 million being held in a trust account covering its stake in the hotel-casino.

MGM Resorts will also collect $71 million for the sale of the land underneath the Borgata.

Meanwhile, the company expects to collect about $125 million in cash on a loan repayment from the MGM Grand Macau this month. A planned initial public offering on the Hong Kong Stock Exchange by the end of the year could raise $350 million to $500 million .

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