(Updates with comments from Tracinda and fresh stock price)
DOW JONES NEWSWIRES
MGM Mirage (MGM) announced plans to take a $955 million
write-down in the third quarter on its CityCenter project in Las
Vegas.
Tracinda Corp., Kirk Kerkorian's investment vehicle, meanwhile,
said it "is exploring the possibility of strategic partnerships or
other alternatives with respect to its investment in" MGM. Tracinda
Corp. was the casino operator's long-time majority owner until
capital-raising efforts earlier this year cut its stake to slightly
under 50%.
But Tracinda said it won't enter into any deal until the after
CityCenter's opening on Dec. 16.
MGM shares rose 5.8% premarket to $12.50. The stock is down 14%
this year and briefly cracked $100 when the market peaked in
October 2007.
Tracinda "believes there is substantial unrecognized value in
MGM Mirage and CityCenter that isn't reflected in the market value
of" the company's stock.
CityCenter was nearly doomed earlier this year amid financing
concerns and a battle with joint venture partner Infinity World
Development Corp. It is a 67-acre, mixed-use complex on the Las
Vegas Strip with residential, retail and casino space.
In addition to the $955 million write-down on its investment in
the project, MGM said it will record an additional $174 million
write-down on the recent price cuts on residential property at the
site. Infinity will see a same-size write-down. MGM will release
its third-quarter results Nov. 5.
The company announced two weeks ago it was cutting the price of
the condos at its $8.5 billion CityCenter development by 30% due to
the economic downturn. The move is intended to address a growing
backlash from many of the people who signed contracts on condos in
the 2,440-unit complex during the height of the Las Vegas real
estate boom. Many had said they would have trouble closing on those
units now that financing has become harder to obtain and the market
in Las Vegas for luxury condos has crashed.
Investors and observers had anticipated a price cut from the
company for some time.
-By Kevin Kingsbury; Dow Jones Newswires; 212-416-2354; kevin.kingsbury@dowjones.com