MGM Resorts reduces CityCenter liens

CityCenter developer MGM Resorts International said it has reduced the amount of mechanics' liens by subcontractors who worked on the massive Strip project by almost $70 million, or about 14 percent.

The casino operator said in a Monday filing with the Securities and Exchange Commission that the reduction was "a result of payments of settlements of underlying subcontractor claims."

The company, which owns CityCenter in a 50-50 joint venture Dubai World, said in the SEC filing that it had amended a $1.8 billion debt agreement for the development, which allows for the mechanics' liens to exist through the end of the year.

MGM Resorts said the mechanics' liens, filed by CityCenter general contractor Perini Building Co. this year, had been reduced from $491 million as of June 30, to $424 million as of Thursday, which was the end of the company's third quarter.

"CityCenter Holdings has been actively pursuing settlements with subcontractors," the company said in the SEC filing.

MGM Resorts and Perini traded charges and countercharges over money owed to subcontractors for work on the $8.5 billion CityCenter, which opened in December. MGM Resorts took over the closeout process with subcontractors last summer after Perini filed the liens and sued the casino operator in Clark County District Court.

In August, MGM Resorts said it had settled overdue payments with 77 of the 233 subcontractors who had filed claims seeking compensation for their work on CityCenter. In previous statements, MGM Resorts officials said the company hoped to resolve the mechanics liens by the end of the year.

"It is our understanding that CityCenter subcontractor liens could materially be resolved by Thanksgiving or sooner," Union Gaming Group principal Bill Lerner told investors following MGM Resorts' filing with the SEC.

"The outstanding lien balance has been shrinking as MGM ... has been settling invoices," Lerner said. "We estimate that once all subcontractors liens are paid or removed in the next few months, approximately $100 million of direct Perini lien exposure will remain."

Wells Fargo Securities gaming analyst Carlo Santarelli said the news from MGM Resorts would be well-received by company shareholders who are worried the Perini lawsuit could weigh down stock values.

"While we sense this amendment was anticipated by investors, we do believe it will remove an overhang on shares in the near term," Santarelli said in a research note.

Much of the argument between Perini and CityCenter surrounds the unfinished Harmon Hotel at the front of the CityCenter site. Construction defect issues caused the tower to be scaled back and redesigned from 47 floors to 26 floors after subcontractors installed defective reinforcement bars.

Perini officials said only a few subcontractors performed the defective work on the Harmon and were held out of the closeout process.

In previous statements, Perini executives said their hope was for subcontractors to be paid while the builder litigated other issues with MGM Resorts.

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