MGM Mirage (MGM) is likely to initiate a debt exchange as part of any restructuring plan the casino operator puts forth to boost its liquidity, Fitch Ratings said Friday.

Fitch believes that "a debt exchange is highly probable," said Michael Paladino, senior director of gaming at Fitch Ratings, during a media breakfast Friday. He said a debt swap would be one part of an overall restructuring strategy for the company.

MGM Mirage, controlled by billionaire investor Kirk Kerkorian, is struggling to pay down more than $14 billion in debt and is considering selling off properties to raise enough cash to meet looming obligations. The company said during a conference call Monday to discuss its earnings that it plans to unveil solutions on how to clean up its balance sheet within the next three weeks.

A company representative wasn't immediately available to comment, but MGM Mirage has said it will explore a debt exchange as one of its options to reduce debt. In addition, several of MGM Mirage's major bondholders reportedly discussed plans to swap debt for stakes in the company if the casino giant were forced to file for bankruptcy protection.

Fitch rates MGM Mirage's debt at single C, which indicates that a coercive debt exchange would be part of the overall restructuring. Such a transaction would involve a material change in terms, i.e., extending debt maturities or a substantial reduction in the principal amount.

Paladino said a debt swap would likely be viewed positively by MGM's bank lenders, certain bondholders, equity investors and management. Such a move, though, would put longer-term unsecured bondholders at a disadvantage, he said.

However, the benefits of a bond swap may be limited, given the recent rally in MGM Mirage's debt on optimism that the casino industry has seen the worst of a brutal downturn.

"Now that the bond spreads are tighter, it may become more difficult to [execute] today," said Paladino of a bond swap. "Any action would need to address the long-term capital structure."

Kimberly Noland, a gambling analyst at Gimme Credit, wrote in a report Friday that MGM Mirage's capital structure is likely unsustainable because of declines in free cash flow and the need to extend large maturities due in 2010 and 2011.

"We think the company will devise a plan to satisfy the banks and avoid a debt restructuring but it could involve layering additional secured debt ahead of the existing bonds," Noland said.

-By A.D. Pruitt, Dow Jones Newswires; 201-938-2269; angela.pruitt@dowjones.com