UPDATE: MGM To Sell $2.5 Billion In Stock, Bonds; Will Repay Debt
13 Maio 2009 - 2:13PM
Dow Jones News
MGM Mirage (MGM) unveiled Wednesday plans to sell $2.5 billion
in stock and notes with some of the proceeds being used to buyback
about $1 billion in debt maturing later this year.
The deals may finally pull the troubled casino operator from its
dangerous debt quagmire, while removing the need for forced asset
sales and distressed debt exchanges.
"This removes the necessity for all of that," said a person
familiar with the company, noting the recent surge in the company's
stock and bond prices made it more advantageous for MGM Mirage to
issue equity and do a debt buyback in lieu of a swap.
"The next big transaction is refinancing the bank debt which is
a 2011 event," he said.
The highly leveraged casino operator also amended its senior
credit facility again, easing some terms further.
Amid the equity raise, a transaction commonly dilutive to
shareholders, MGM's share price declined 19.3% to $10.01 in recent
trading. Meanwhile, the company's 8.375% bonds due 2011 were up
14.5 points at 80, while the 8.5% 2010 notes gained 4 points at 90,
according to MarketAxess.
MGM Mirage, controlled by billionaire investor Kirk Kerkorian,
is struggling to pay down more than $14 billion in debt and had
considered selling off properties to meet looming obligations.
Major bondholders such as activist investor Carl Icahn and
private-equity fund Oaktree Capital Management also 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.
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 had 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.
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 A.D. Pruitt, Dow Jones Newswires, 201-938-2269,
angela.pruitt@dowjones.com
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com