DOW JONES NEWSWIRES
MGM Mirage (MGM) on Wednesday announced plans to sell $2.5
billion in stock and notes, with some of the proceeds going to a
tender offer to buy $1.05 billion in debt that matures later this
year, as the highly leveraged casino operator again amended its
senior credit facility, easing some terms further.
The casino operator, controlled by billionaire investor Kirk
Kerkorian, is struggling to pay down more than $14 billion in debt
and is considering selling off properties to meet looming
obligations. Major bondholders such as activist investor Carl Icahn
and private-equity fund Oaktree Capital Management have called for
a bankruptcy filing.
The stock sale comes as numerous companies have announced
secondary offerings in recent weeks to take advantage of the
equity-market rebound. MGM has surged more than sixfold the past
two months, but remains off by three-quarters in the last year. The
stock closed Tuesday at $12.40 and hasn't traded premarket.
According to the amended pact, the company will repay $750
million in credit-line borrowings, and may potentially have to pay
back more if the offerings' proceeds exceed $2.5 billion.
MGM announced plans to sell 81 million shares - the company
currently has about 277 million outstanding - with 54%-owner
Tracinda Corp. indicating it would purchase 10% of the
offering.
The note sale is intended to made through a private placement in
two tranches due 2014 and 2017. The notes will be secured by a
first-priority lien on all the assets of the Bellagio Hotel and
Casino and the Mirage, two of MGM Mirage's key Las Vegas Strip
properties acquired early this decade when MGM acquired Mirage.
MGM last amended its senior credit facility in mid-April to
allow it to pay the full construction costs on its Las Vegas City
Center project. Investors have been concerned about a possible
default on the credit pact after MGM's auditor raised doubts about
its ability to continue as a going concern. Prior to that, its
lenders had already granted a waiver of covenants on its senior
credit facility through Friday.
All three major ratings agencies have cut MGM's credit ratings
repeatedly in the last few months because of its debt woes. Fitch
Ratings said Friday the company was likely to initiate a debt
exchange as part of any restructuring plan. MGM has said it plans
to unveil solutions on how it will clean up its balance sheet in
the next several weeks.
Last week, MGM reported first-quarter earnings fell 11% as a
gain from the sale of Treasure Island masked lower revenue from
canceled conventions and reduced customer spending because of the
recession.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com