Friday, April 17, 2009 | 3:54 p.m.
- Report: MGM, Dubai World reach deal on CityCenter (4-17-09)
- Report: Icahn, equity fund push for MGM bankruptcy (4-16-09)
- MGM Mirage gets waiver for $70M CityCenter payment (4-13-09)
- Dubai World wants assurance of CityCenter funding (4-10-09)
- MGM Mirage stock surges on corporate financing news (4-6-09)
- MGM Mirage hires investment firm (4-4-09)
- Australian businessman weighing CityCenter investment (4-3-09)
- CityCenter contingency plan emerges; investor shows interest (3-28-09)
- CityCenter safe — for now (3-28-09)
- In a recession, a delay could be seen by rivals as a positive development (3-28-09)
CityCenter partners MGM Mirage and Dubai World are hammering out a plan that aims to guarantee funding for the financially troubled project due to open this year, according to sources who declined to be named.
If approved by CityCenter's bank lenders, the plan would amend the terms of a $1.8 billion loan to the CityCenter partnership by removing a so-called cross-default provision.
Should MGM Mirage default on its $7 billion bank loan, the default would trigger a default of the separate CityCenter loan. That would put the $1.8 billion needed to finish CityCenter at risk by enabling the banks to walk away with all, or some, of the money pledged to the project.
Removing that possibility could save the project if MGM Mirage defaults on its loan by seeking bankruptcy protection or by some other triggering event. Some of the same banks involved in the $7 billion loan to MGM Mirage are involved in the $1.8 billion loan to CityCenter.
The banks imposed the cross-default language to protect their investment in CityCenter, as a Chapter 11 bankruptcy for MGM Mirage could threaten the company's ability to continue funding the project.
Negotiations are also underway to amend CityCenter's completion guarantee – a lender requirement that MGM Mirage and Dubai World fund any cost overruns beyond the amount both partners agreed to pay beforehand and the $1.8 billion loan. One scenario would leave MGM Mirage on the hook for more of these additional costs, if any.
Dubai World representatives declined to comment on the proposals.
MGM Mirage spokesman Alan Feldman declined to comment other than to say the company "continues to work with lenders and financial partners and is having productive conversations."
MGM Mirage today said it paid another $70 million to fund CityCenter on behalf of the company and Dubai World, which has refused to make subsequent CityCenter payments after filing a breach of contract lawsuit against MGM Mirage last month. Dubai World claims MGM Mirage mismanaged CityCenter, leading to a budget increase of more than a billion dollars since the parties signed a joint venture agreement in August 2007.
In recent months, MGM Mirage, which is overseeing management and construction of CityCenter, has cut hundreds of millions of dollars out of the project, which now has a construction budget of $8.7 billion.
MGM Mirage's future remains uncertain as it looks to reduce massive debts racked up during the real estate boom and, while earnings plummet, pay off billions in loans coming due over the next couple of years. The company is seeking to sell casinos and is negotiating with lenders on a plan to restructure its debts outside of bankruptcy court, though some analysts say the company may need to file for bankruptcy protection.