Funding Comes Through for Casino Giant's 'City Within a City' Despite Capital Market Woes

MGM Mirage officials say CityCenter in Las Vegas is one of the largest and most expensive development projects in U.S. history.

What credit crunch? MGM Mirage and its Dubai-based partner said this week they have successfully amended their senior credit facility and completed $1.8 billion of the $3 billion in financing needed to complete the CityCenter joint-venture development on the Las Vegas Strip, one of the world's biggest and most expensive construction projects.

MGM Mirage (NYSE: MGM), controlled by billionaire investor Kirk Kerkorian, said that in addition to the new $1.8 billion credit facility led by Bank of America, Royal Bank of Scotland, UBS, BNP Paribas, and Sumitomo Mitsuiis, the JV has received signed commitments for $500 million and hopes to raise more funds to complete the $3 billion financing package for the 76-acre "city within a city." Both MGM Mirage and partner Dubai World are working with lenders through a syndication process to fill the gap.

A number of states, including Kentucky, Maine, Pennsylvania, Ohio, Illinois, Massachusetts and Kansas, are considering casino projects as an alternative revenue source as the economic downturn continues to strap state and local coffers. However, worsening economic and credit conditions and tightened consumer spending have busted the shares of casino companies over the last year, particularly during the third quarter.

Many have been forced to abandon or suspend development projects. Pinnacle Entertainment (NYSE: PNK) pulled the plug on a $625 million casino resort and hotel in Wyandotte County, Kansas, and delayed its planned $1.5 billion to $2 billion mega-resort in Atlantic City, NJ. Shares of Trump Entertainment Resorts Inc., which operates Donald Trump's three casino, were hammered during the quarter, as were those of Boyd Gaming Corp. Some hotel and casino operators have run into liquidity problems, including Las Vegas Sands Corp., which received a $475-million infusion from its chairman Sheldon Adelson last week.

Gambling analysts lauded the CityCenter credit facility as a vote of confidence in the project. MGM said the amended credit facility raised the maximum total leverage ratio to 7.5 times cash flow. Previously, the leverage ratio was set at 6.5 times cash flow through Sept. 30, 2009, stepping down to six times on Dec. 31, 2009.

"Even in the current difficult lending environment, strong well-conceived projects attract financing -- CityCenter is such a project. We appreciate the strong support CityCenter has received from these participating financial institutions," said Dan D'Arrigo, executive vice president/CFO of MGM Mirage.

Gross costs are expected to total $9.3 billion, including construction and interest, $1.7 billion for land, $200 million for pre-opening expenses and $100 million of intangible assets. CityCenter is scheduled to open in late 2009 between Bellagio and Monte Carlo resorts on the Las Vegas Strip. The project features a 61-story, 4,000-room gaming resort; three luxury non-gaming hotels including Las Vegas' first Mandarin Oriental; the 2,600-condo Veer Towers, and The Crystals, a 500,000-square-foot retail and entertainment district.

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