MGM lines up Detroit casino financing

MGM Grand Inc. of Las Vegas announced it received commitments from a consortium of banks for a 5-year, $230 million credit facility to finance its new Detroit operation.

The facility was led by Bank of America, NBD Bank and Comerica. Michigan co-agent banks include Michigan National Bank, Old Kent Bank, National City Bank and First Independence Bank of Detroit.

Approximately two-thirds of the commitments are from Michigan-based banks, mostly from the greater metropolitan Detroit area. The facility may be increased to $250 million at the company's discretion.

Proceeds will be used to finance the development of MGM Grand Detroit's temporary casino, the initial development and construction of its permanent casino complex and for general working capital.

MGM Grand is paying about 6.5 percent interest for the credit, about half a percentage more than its typical interest rate, the Detroit News reported.

The company could have financed the Detroit operation with existing resources, existing banking relationships and the issuance of stock or bonds. But it chose to borrow from the Michigan banks in order to strengthen its ties to the Detroit community.

The Las Vegas company, controlled by billionaire Kirk Kerkorian, has been criticized by minority activists in Detroit because they say it has a small percentage of local minority ownership compared to two other Detroit casino developers.

Critics weren't impressed with Tuesday's bank deal.

"That doesn't help the cause we're really concerned about -- African-American ownership," Junious Williams of the Community Coalition told the Detroit News.

But minority-owned First Independence Bank was glad to be included in the deal.

"To do business with a business the size of MGM is a very good statement for the environment that's developing in the city," Chairman Donald Davis told the News.

"We are delighted that our commitment to do business with local Detroit banks, as well as banks throughout the state of Michigan, received overwhelming support. The facility was oversubscribed with approximately 66 percent of the commitments allocated to banks from the greater metropolitan Detroit area," said J. Terrence Lanni, MGM Grand chairman and chief executive and Alex Yemenidjian, president and chief operating officer.

MGM's temporary gaming facility at an old IRS building will consist of approximately 73,000-square-feet of casino space and contain more than 2,300 slot machines, 80 table games as well as specialty restaurants and bars.

archive