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Talks on CityCenter loan reported to have collapsed

MGM Mirage (MGM) and Dubai World’s talks with Deutsche Bank AG for a $1.2 billion loan to complete the Las Vegas CityCenter project collapsed after a disagreement over terms, according to five people with knowledge of the matter.

Deutsche Bank was seeking equity and debt stakes in the $11.2 billion development on the Strip in return for the loan, said the people, who spoke on the condition of anonymity. MGM Mirage and Dubai World, which would have merged CityCenter with a neighboring property owned by the bank, are now holding talks with other parties, one of the people said.

The stock price of MGM Mirage, majority-owned by 91-year-old investor Kirk Kerkorian, fell to its lowest point in at least 19 years in U.S. trading Wednesday after the company said it might breach financial covenants under its senior credit facility this year. Reaching a deal with Frankfurt, Germany-based Deutsche Bank would have helped MGM Mirage and its Dubai partner finish the project without spending more of their own cash.

“We are having ongoing talks with our financial partners about our several options,” MGM Mirage spokesman Alan Feldman said.

A Deutsche Bank spokesman declined to comment.

Deutsche Bank had considered combining the nearby property, the Cosmopolitan, also under construction on the Strip, with the 67-acre CityCenter development between Bellagio and Monte Carlo. CityCenter is scheduled to open late this year.

Agreeing to the transaction with Las Vegas-based MGM Mirage might have enabled Deutsche Bank to avoid booking a write-down on Cosmopolitan, which it foreclosed on last year after developer Bruce Eichner defaulted on a $760 million loan. The bank holds about $1.5 billion of Cosmopolitan’s debt, two people with knowledge of the situation said Feb. 23.

“If the deal is off, MGM Mirage will have to consider other options such as asset sales,” Michael Paladino, an analyst at Fitch Ratings, said. “Investor sentiment around Las Vegas is at an all-time low so it will be difficult to raise capital in public markets. No asset sales would be off the table for MGM and it’s definitely a buyer’s market.”

MGM Mirage shares have slumped 84 percent this year. They closed Wednesday at $2.21, down 41 cents, or 15.65 percent, in New York Stock Exchange trading, the lowest close since at least December 1989.

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