Saturday, Dec. 20, 2008 | 1:59 a.m.
On the regulatory climate in Nevada
I think the gaming commission in the state of Nevada in the future should be more demanding, more restrictive. There was a licensing application from the Dubai World last week, two weeks ago, of course they were suitable in terms of their character, backgrounds … there was no demand of proof of liquidity. Why not? Why not? Is that not part of suitability? Is not the ratio of debt to equity, the financial viability of companies …
I remember when I sold Mirage to Kirk. I asked him when we were alone, how is he going to pay for it? How is he going to do it if they were half our size, meaning MGM. He said, ‘Stevie, I’ll put up a billion of my own money. The minute he said that, and he was true to his word, incidentally, he ended up backstopping in equity and a debt deal to make that deal happen. He put his net worth on the line and made sure that the money went into the company.
A big chunk of it was his own and he bought some bonds and he flipped them for profit later but the money went into the company. And that’s why, and MGM Mirage after the merger was well positioned economically in terms of its financial capital structure, which is why it could absorb the hit from 9/11. But then we went on to borrow more money and do other things, all of us, and all I’m saying is that in a regulated business and in a state where the economy depends on one industry and so much of the employment of this state is in the hands of so few, I think the state of Nevada should be very preemptive and demanding about the balance sheets of licensees and those balance sheets should be measured in terms of their ability to withstand the maturity of their debt in a bad time, their ability to complete projects financially before they start them, not after.
And it’s been the process here to license these projects after they were finished, when, if something was wrong, it was too late to turn them down and the people were hired. They have these licensing hearings of five weeks before the place is open and then the gaming commission is put in a ridiculous position of saying, ‘well, we won’t license you and that means all of the jobs are out the window, so it’s impossible politically or economically to do a thing like that so I’m thinking that this is a good time for Nevada, as a regulated industry state, to revisit this issue and put some stiffeners in the requirements for how you run your business around here.
On Phil Ruffin's purchase of Treasure Island
He called the other day and I returned his call and I said, ‘what is it did you miss the neighborhood?’ and he said ‘yes.’ He said ‘the money -- I didn’t know what to do with the cash,’ he said ‘don’t you think I made a good deal? ‘I said good deal for you, good deal for MGM now the Treasure Island have got a da-da. Treasure Island had good management Mikulich, the kid who runs it, he worked for me as a slot guy downtown, I’ve known Tom for a long time and he is a cool guy and he has a good organization, so Phil is stepping into a well-managed business.
Now, the employees from Mr. Mikulich on down -- everybody is safe at Treasure Island when Phil takes over because he’s got $500 million in equity and $250 million in debt. That place will be well cared for, nobody is going to get laid off. He knows exactly the financial structure of this transaction is over the moon strong -- stronger than it had to be. You know three-to-one equity to debt.
I mean it’s enormous and so that means everybody is safe and they’ve got the money to compete, to get clever to try and steal business from the other guys and that is how Las Vegas got good in the first place. So it’s great to have Phil back, he was a fun neighbor. You know, when he told me once how much he was going to get for that property I said ‘you’ll never get that much for the Frontier.’
If you get that much for the Frontier I’ll kiss your butt in front of Caesars Palace. He got it and he was kind enough to relieve me of keeping my word. But that sucker got that astronomical galactic price. Unbelievable for him a transaction … (Robin Leach: He got the T.I. for free) … with change. He’s got money to subsidize T.I. for the rest of his life. He’s a cool guy and a canny guy, you know, a cunning fellow. So it would be great to have him as a neighbor.
I’m really in favor of the “unbundling” of Las Vegas. Las Vegas got great because there are different groups that owned the hotels and they were competing with one another. They were friends, but they competed, but they were buddies. They use to gamble at each other’s joints at night and lose their money. They were all buddies. I loved it back then. I was never in favor of this consolidation move. I always thought it was a bad thing for town. I think it will be better for MGM to be a little leaner. The guys, they’re smart guys over there, they’ll do a better job of running the business when they’re not as spread out. Concentrate their talent on fewer properties, they’ll be more potent and I feel the same way about Harrah’s, too. I think that the “unbundling” of Las Vegas will be a good thing and I think the gaming commission ought to take note of that.
- Interview transcribed by Mytae Carrasco