Wednesday, Oct. 22, 2008 | 6:42 p.m.
Those investors who figured MGM Mirage couldn't trade much below $20 a share a few weeks ago got another nasty surprise today, when bond rating agency Fitch Ratings issued an especially bearish outlook on the company.
MGM Mirage serves as a bellwether for the Strip, where it owns 10, or nearly half, of the megaresorts on Las Vegas Boulevard.
MGM Mirage fell 14 percent today, hitting a new low of $12.44 per share. Shares are down nearly 85 percent so far this year.
In other words, it doesn't look like this gaming recession has hit bottom yet.
"MGM's refinancing risk is substantial, as it is still trying to secure additional CityCenter funding, while also needing to refinance $1.28 billion of debt in the next 12 months," Fitch analyst Michael Paladino said.
While that seemed clear a few weeks ago, the report was more telling about bad news to come: The tourism economy continues to deteriorate in Las Vegas, with third quarter trends "notably worse" than than the first two quarters of earnings
reported by the company and future quarters likely to remain weak in Las Vegas, the report said.
Besides its own large cash reserves, MGM Mirage has two not-so-secret weapons to keep it out of restructuring.
This week, billionaire dealmaker Kirk Kerkorian, who owns 54 percent of MGM Mirage through his Tracinda Corp. investment company, sold a stake in Ford Motor Co. and indicated that he might dump all of his Ford shares and reallocate the funds to other industries, including gaming.
While the auto industry is fundamentally troubled, the gaming industry, and especially MGM Mirage, is a strong business going through a rough patch, Kerkorian seems to be saying.
Either Kerkorian or Dubai World, which owns 9.4 percent of MGM Mirage stock and half of the CityCenter joint venture with MGM Mirage, could pony up cash to meet debt obligations, Paladino noted in his report.