Saving CityCenter required hundreds of consultants, cool heads in corporate

The $8.5 billion CityCenter, billed as the most expensive private commercial development in U.S. history, was a few hours from shutting operations on the morning of March 27.

Earlier that week, MGM Mirage was sued in Delaware by Dubai World, its 50-50 joint venture partner in the 76-acre Strip project.

MGM Mirage needed to make a $200 million equity payment — half of which would be on behalf of Dubai World — or else CityCenter was headed into bankruptcy. Building activity would be halted and some 8,500 construction workers would lose their jobs.

Inside MGM Mirage’s corporate headquarters at the Bellagio, Chief Financial Officer Dan D’Arrigo sat at a conference table with company Chairman and Chief Executive Officer Jim Murren. They were waiting for word that a majority of the company’s banks were willing to let MGM Mirage make the payment.

Suddenly, the floor-to-ceiling windows aligning the spacious office that once belonged to Bellagio builder Steve Wynn began to shake.

News helicopters from Las Vegas’ television stations were hovering overhead, waiting to capture the exodus of construction workers when the CityCenter site was shuttered.

"It was pretty surreal," D’Arrigo recalled.

Moments later, Bill Repko from Evercore, a financial consulting firm retained by MGM Mirage, walked into the room and showed Murren and D’Arrigo the confirmation message on his Blackberry. The last bank had agreed to the payment and majority consensus was reached.

CityCenter would live another day.

"It kind of lightened the mood a bit," D’Arrigo said. "It could have been pretty ugly."

MGM Mirage, which operates nine Strip casinos, engaged in months of complex financial negotiations to secure the final $1.8 billion in financing needed to complete CityCenter.

The surprise lawsuit by Dubai World, the investment arm for the Persian Gulf emirate, sent the talks into overdrive. The company’s joint venture agreement needed to be restructured or else the complex would be bankrupt.

At the same time, an array of financial problems arose concerning MGM Mirage’s more than $14 billion in long-term debt. Auditors said the Strip casino giant was in non-compliance with its bond covenants, which could trigger a corporatewide bankruptcy filing.

Both matters were resolved by the middle of May.

A comprehensive plan to fully fund and complete CityCenter was agreed upon by MGM Mirage and Dubai World on April 29, ending the 5-week-old public feud. The project will open by December.

Two weeks later, MGM Mirage unveiled a four-pronged corporate restructuring plan that raised $2.6 billion and gave the company time to resolve its debt and leveraging problems without a bankruptcy filing.

D’Arrigo said that in normal times, a corporate financing plan of that magnitude would take months to negotiate and complete. MGM Mirage and its banks stuck the deal in a matter of weeks.

"It was truly remarkable what was accomplished," D’Arrigo said.

Getting there, however, was not simple.

The work involved dozens of MGM Mirage corporate employees, who were assisted by hundreds of outside advisers from nearly two dozen outside firms weighing in from both U.S. coasts and around the world.

When all is said and done, MGM Mirage will have paid millions of dollars in fees to consultants.

Some of the advisers were given makeshift offices in Bellagio suites that were commandeered by the company and stripped of their luxury items. Secondary corporate offices at Mandalay Bay were utilized, as were offices in the temporary CityCenter headquarters behind New York-New York.

The banking partners were also global, with headquarters in such places as Scotland, Japan, Germany and Canada, as well as New York.

Meetings oftentimes took place at odd hours.

Dubai World is headquartered in the United Arab Emirates. Midmorning in Las Vegas is the middle of the evening in the Middle East. Many of Dubai World’s key advisers are in Singapore, an island nation located in Southeast Asia whose time zone is 15 hours ahead of Las Vegas.

Hundreds of seemingly nonstop telephone conference calls were held at all hours of the day and night.

Weekdays and weekends sort of blended together. Family events were put on hold. Vacations were canceled. Overnight trips to New York for meetings were not uncommon.

The legal documents encompassed thousands of paper reams. At one of the company’s many board of directors meetings held during the process, MGM Mirage general counsel Gary Jacobs said he provided 12 different sets of minutes from previous meetings for the board to review.

"Brazil used to have forests," Jacobs said.

D’Arrigo spent Easter Sunday outside a restaurant in his car on a telephone conference call while his family ate dinner inside.

"I don’t even want to talk about my 15th anniversary," he said.

At one point, D’Arrigo said he would only get on a conference call if he was provided with an agenda. Once, he began a conference call about a portion of the CityCenter financing at his office at Bellagio. He exited the call to go home, but then got right back on the conversation in his home office. He actually caught himself nodding off during the call.

Oftentimes, he ended a four- or five-hour call, only to immediately take another call.

"One time, I got on a call and something like 80 people beeped in," D’Arrigo said. "We had to do all we could to keep people organized and focused on the different pieces of the puzzle. If they didn’t sync up, then it wouldn’t make sense. You couldn’t do C if you hadn’t completed parts A and B first."

The work was highly stressful.

Jacobs, D’Arrigo and their teams laid out several possible paths the company could follow out of the abyss.

"There were a multitude of different roads this could have gone down," said D’Arrigo, who has spent 13 years with MGM Mirage including the last two as CFO. "We laid out the paths and ranked them."

MGM Mirage’s in-house legal group was beefed up by outside specialized law firms and advisers. The financial team included accountants, auditors, tax and financial experts and was fortified by outside help, including firms specializing in corporate financial restructuring matters and investment banking.

But with credit markets having collapsed, the stock market in a shambles and the lending industry all but dried up, the road was never clear and the direction constantly changed.

"It was kind of like going down a river, but you would hit one set of rapids, and then you hit another set of rapids, and another, and then another one. It was nonstop," Jacobs said.

The key to the entire process was resolving the CityCenter issue.

"If CityCenter went bankrupt, it would not have only been a horrible situation for Las Vegas, but it would have complicated the corporate issues," Jacobs said. "It was needed to be initially addressed."

MGM Mirage and Dubai World had seemingly progressed toward triggering the mechanisms needed to secure $1.8 billion that banks had agreed upon to fund the development.

During the company’s fourth-quarter earnings conference call, Murren told analysts the relationship with Dubai World was "outstanding."

But problems surfaced on March 22 when Dubai World sued MGM Mirage in Delaware Chancery Court, claiming its joint venture partner had mismanaged the project and caused cost-overruns.

The lawsuit came out of the blue and pressed the timeline. Dubai World wasn’t going to kick in its share of the costs. Equity payments were due on CityCenter and it was clear MGM Mirage would not only have to fund its portion, but Dubai World’s as well.

"It’s not every day that you wake up on a Monday morning and your partner sues you in court," D’Arrigo said. "But we did not feel it was in anyone’s best interest to get angry in public. We needed to get to the bottom of the matter and find a solution."

Jacobs, who joined MGM Mirage in 2000 after nearly 30 years as a partner with a pair of high-profile Los Angeles-based law firms, said he could revert into lawyer mode and "instinctively" respond to the lawsuit or the company could ignore the filing and attempt to negotiate a resolution.

The other complication was media leaks. During the negotiations, reports surfaced about several different potential investors looking to either acquire one of MGM Mirage’s casinos, invest in CityCenter or acquire the company’s long-term debt.

Jacob said MGM Mirage was not a source of the stories.

"The leaks were frustrating because it was like a sieve," Jacobs said. "Everybody was trying to manipulate something for whatever purpose or their own purpose. That complicated matters."

At one point Jacobs had to rein in attorneys from the eight law firms advising MGM Mirage in both the CityCenter and corporate restructuring process who were racking up billable hours.

"Part of my function was to put law firms on diets," Jacob said. "There were many decisions to be made and you couldn’t do it by committee."

Before the resolution with Dubai World was reached, MGM Mirage needed clearance from its banking partners to make equity payments. Some of the banks are only tied to the corporate side and are not part of the CityCenter funding group. An educational process was needed.

"A lot of the big banks brought senior people here so they could understand what CityCenter was and is," D’Arrigo said. "Most of the people around the world thought there was nothing but tumbleweeds up and down the Strip. We needed them to understand there was still a vibrant community here."

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

ad-high_impact_4
Business
UNLV Tech Park innovation building breaks ground
Construction on the first innovation building at the UNLV Tech Park is underway. (Bailey Schulz/Las Vegas Review-Journal)
Caesars Forum Meeting Center
Caesars broke ground Monday on its $375 million Caesars Forum Meeting Center (convention center) just east of the High Roller observation wheel. (Caesars Entertainment)
Technology reshapes the pawn shop industry
Devin Battersby attaches a black-colored device to the back of her iPhone and snaps several of the inside and outside of a Louis Vuitton wallet. The device, installed with artificial intelligence capabilities, analyzes the images using a patented microscopic technology. Within a few minutes, Battersby receives an answer on her app. The designer item is authentic.
Recreational marijuana has been legal in Nevada for one year
Exhale Nevada CEO Pete Findley talks about the one year anniversary of the legalization of recreational marijuana in Nevada. (K.M. Cannon/Las Vegas Review-Journal)
Young adults aren't saving for retirement
Financial advisors talk about saving trends among young adults. (Bailey Schulz/Las Vegas Review-Journal)
President Trump’s tariffs could raise costs for real estate developers, analysts say
President Donald Trump made his fortune in real estate, but by slapping tariffs on imports from close allies, developers in Las Vegas and other cities could get hit hard.
Las Vegas business and tariffs
Barry Yost, co-owner of Precision Tube Laser, LLC, places a metal pipe into the TruLaser Tube 5000 laser cutting machine on Wednesday, June 20, 2018, in Las Vegas. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Nevada Film Office Connects Businesses To Producers
The director of the Nevada Film Office discusses its revamped locations database and how it will affect local businesses. (Bailey Schulz/Las Vegas Review-Journal)
Opendoor isn't the typical house flipping company
Unlike most house flippers, the company aims to make money from transaction costs rather than from selling homes for more than their purchase price.
The Venetian gondoliers sing Italian songs
Gondolier Marciano sings a the classic Italian song "Volare" as he leads guests through the canals of The Venetian in Las Vegas. (K.M. Cannon/Las Vegas Review-Journal)
Building In Logandale
Texas homebuilder D.R. Horton bought 43 lots in rural Logandale. (Eli Segall/Las Vegas Review-Journal)
Indoor farming in Southern Nevada
Experts discuss Nevada's indoor farming industry. (Bailey Schulz/Las Vegas Review-Journal)
Former Fontainebleau could have become a Waldorf Astoria
Months after developer Steve Witkoff bought the Fontainebleau last summer, he unveiled plans to turn the mothballed hotel into a Marriott-managed resort called The Drew. But if Richard “Boz” Bosworth’s plans didn’t fall through, the north Las Vegas Strip tower could have become a Waldorf Astoria with several floors of timeshare units. (Eli Segall/Las Vegas Review-Journal)
LVCVA CEO Rossi Ralenkotter announces plans to retire
Rossi Ralenkotter, CEO of the LVCVA, on Tuesday confirmed a Las Vegas Review-Journal report that he is preparing to retire. Richard N. Velotta/ Las Vegas Review-Journal
Cousins Maine Lobster to open inside 2 Las Vegas Smith’s stores
Cousins Maine Lobster food truck company will open inside Las Vegas’ two newest Smith’s at Skye Canyon Park Drive and U.S. Highway 95, and at Warm Springs Road and Durango Drive. Cousins currently sells outside some Las Vegas Smith’s stores and at Fremont Street and Las Vegas Boulevard. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas home prices to continue to rise, expert says
Lawrence Yun, chief economist at the National Association of Realtors, gives homebuyers a pulse on the Las Vegas housing market. (Eli Segall/Las Vegas Review-Journal)
NV Energy announces clean energy investment
The company is planning to add six solar projects in Nevada, along with the state's first major battery energy storage capacity. Bailey Schulz/Las Vegas Review-Journal
3 Mario Batali restaurants on Las Vegas Strip to close
Days after new sexual misconduct allegations were made against celebrity chef Mario Batali, his company announced Friday that it will close its three Las Vegas restaurants July 27. Employees of Carnevino Italian Steakhouse, B&B Ristorante and Otto Enoteca e Pizzeria, all located in The Venetian and Palazzo resorts, were informed of the decision Friday morning. Bastianich is scheduled to visit the restaurants Friday to speak to employees about the next two months of operation as well as how the company plans to help them transition to new positions.
Nevada has its first cybersecurity apprenticeship program
The Learning Center education company in Las Vegas has launched the first apprenticeship program for cybersecurity in Nevada. It was approved by the State Apprenticeship Council on May 15. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas union members voting to authorize the right to strike
Thousands of Las Vegas union members voting Tuesday morning to authorize the right to strike. A “yes” vote would give the union negotiating committee the power to call a strike anytime after June 1 at the resorts that fail to reach an agreement. (Todd Prince/Las Vegas Review-Journal)
Small businesses struggle to find qualified candidates
A 2018 survey found that over two-thirds of small businesses in Nevada find it somewhat to very difficult to recruit qualified candidates. Bailey Schulz/Las Vegas Review-Journal
Nevada secretary of state website offers little protection against fraudulent business filings
Property developer Andy Pham tells how control of his business was easily seized by another person using the secretary of state website.
Caesars may be going solo in its marijuana policy
Several Southern Nevada casino companies aren’t following Caesars Entertainment’s lead on marijuana testing.
How much is the Lucky Dragon worth?
Less than a year-and-a-half after it opened, the Lucky Dragon was in bankruptcy.
Gyms and discount stores take over empty retail spaces
Grocery stores used to draw people to shopping centers. But many large retail spaces have been vacant since 2008. Discount stores like goodwill and gyms like EOS Fitness are filling those empty spaces, and helping to draw shoppers back in. K.M. Cannon/Las Vegas Review-Journal
Funding source of Las Vegas stadium for the Raiders is sound, expert says
The stadium is funded in part by $750 million of room taxes, the biggest such tax subsidy ever for a professional sports stadium. Robert Lang, executive director of Brookings Mountain West and The Lincy Institute at UNLV, says that is a good use of public funds. (Richard Velotta/Las Vegas Review-Journal)
Las Vegas needs light rail, expert says
Robert Lang, executive director of Brookings Mountain West and the Lincy Institute said he is afraid of a "congestion mobility crisis." Las Vegas needs a light rail system, he said, to accommodate the city's growing number of attractions. (Richard Velotta/Las Vegas Review-Journal)
Three takeaways from Wynn Resorts' Earnings Call
Matt Maddox came out swinging in his first earnings conference call as Wynn Resorts chief executive officer, boasting of record Las Vegas quarterly revenues and applicants lining up for work.
Star Wars VR Comes to Las Vegas
Sneak peak at the new "Star Wars: Secrets of the Empire" VR experience at the Grand Canal Shoppes.
Elaine Wynn continues her fight to change Wynn Resorts board
Elaine Wynn, the largest shareholder of Wynn Resorts Ltd., is seeking to kick a friend of her ex-husband Steve Wynn off the company’s board of directors. (Todd Prince/Las Vegas Review-Journal)
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like