ad-fullscreen

MGM to divest from Atlantic City

MGM Mirage wants to divest itself from its Atlantic City holdings by placing its 50 percent ownership stake in the Borgata resort and its vacant land into a trust arrangement.

The proposal, now being discussed with New Jersey gaming authorities, will allow MGM Mirage to sell its stake in the casino, which the company owns in a joint venture agreement with Boyd Gaming Corp.

In May, the New Jersey Division of Gaming Enforcement ruled Hong Kong businesswoman Pansy Ho, the company’s joint-venture partner in Macau, was unsuitable for business dealings. Ho is the daughter of billionaire Macau casino kingpin Stanley Ho, who is alleged by authorities to have ties to Chinese organized crime triads.

MGM Mirage and Pansy Ho each own 50 percent of the MGM Grand Macau, which opened in December 2007. Gaming regulators in both Nevada and Mississippi gave their approval to the MGM Mirage-Pansy Ho partnership in 2007.

In a Monday filing with the Securities and Exchange Commission, in which MGM Mirage said it planned to amend the structure of nearly $5.6 billion of debt, one of the obligations the company disclosed was the New Jersey matter.

MGM Mirage said the company was in settlement discussions with the Division of Gaming Enforcement, which asked the state’s Casino Control Commission to order MGM Mirage to “disengage itself” from Pansy Ho.

“We disagree with the New Jersey Division of Gaming Enforcement’s recommendation to the Casino Control Commission concerning our Macau partner, but believe pursuing a settlement with the DGE represents the best course of action for our company and its shareholders,” MGM Mirage Chairman and Chief Executive Officer Jim Murren said in a statement. “We would like to put this matter behind us and move forward with the compelling growth opportunities we have in Macau.”

Under the proposed plan, MGM Mirage would be the sole economic beneficiary of the trust. While a definitive settlement with New Jersey has not been reached, MGM Mirage asked its lenders to consent to the trust arrangement. Any settlement is subject to approval by New Jersey casino authorities.

Casino Control Commission Dan Heneghan said a hearing would be set once MGM Mirage and the division reach a settlement.

A spokesman for MGM Mirage said it was too early to say if there was a buyer for the company’s Atlantic City holdings because the proposal hasn’t been agreed upon or approved.

In addition to a 50 percent ownership in the Borgata, MGM Mirage owns a 72-acre land parcel near the resort in an area known as Renaissance Pointe.

In 2007, MGM Mirage said it would spend $5 billion to build MGM Grand Atlantic City on the vacant site, but the project was scrapped when the economy tanked. Gaming revenues in Atlantic City have declined over the past 24 months.

Boyd Gaming, which operates the 2,800-room hotel-casino, has the right of first refusal to purchase MGM Mirage’s stake in the Borgata.

“We are aware of the ongoing discussions between MGM Mirage and the New Jersey Division of Gaming Enforcement,” Boyd Gaming spokesman Rob Meyne said. “We’ll wait until the matter is formally resolved before offering any additional comments.”

Wall Street was not surprised MGM Mirage would look to sever itself from Atlantic City rather than Macau.

JP Morgan gaming analyst Joe Greff told investors the move made sense for MGM Mirage.

“It’s a pretty simple analysis. MGM Mirage is choosing its Macau joint venture over its Atlantic City joint venture, given Macau’s growth versus Atlantic City’s positioning in an increasingly competitive Northeast U.S. gaming market,” Greff said in a research note.

MGM Mirage is in the early stages of an initial public offering on the Hong Kong Stock Exchange that could raise up to $1 billion. Resolving the issue with Atlantic City is viewed as a step in the process.

“While there has been no settlement with DGE yet, we believe that this is a good step forward to enable the company to move ahead with its plans for a potential IPO in Macau,” Deutsche Bank gaming analyst Andrew Zarnett said. “We believe that before a Macau IPO is executed the New Jersey issue must be resolved.”

The debt amendments proposed by MGM Mirage would push back the maturity dates of the debt by more than two years. The company said Monday it wants final approval from lenders by Feb. 24.

In a statement, MGM Mirage Chief Financial Officer Dan D’Arrigo said the company had received “strong initial support” from some lenders and is seeking approval from others.

Moody’s Investors Service, after the SEC announcement, said it may upgrade the ratings for MGM Mirage.

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

section-ads_high_impact_4
TOP NEWS
ad-315×600
News Headlines
pos-2 — ads_infeed_1
post-4 — ads_infeed_2
Local Spotlight
Events
Home Front Page Footer Listing
Circular
You May Like

You May Like