Given the tremors that are coursing through the financial cosmos, due to the Dubai World restructuring, here are a few relevant paragraphs from J.P. Morgan’s recent rundown of the situation:
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We think the direct implications of DW’s actions last week on CityCenter and MGM [Mirage] are de minimis. Dubai World has already fully funded its entire capital commitment in CityCenter, so there is no risk there. There are no cross default provisions that would trigger a default at the CityCenter property level (recall CC has a $1.8b credit facility there), so we don’t see any risk or issues involving CC’s debt facility. Should DW look to sell its stake in CC, MGM would have the right of first refusal (and as we understand it, the last) to buy out DW’s stake (especially if it were to be sold at what MGM would deem to be a fire sale price).
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We think a more realistic issue for DW (but one we would ascribe a very low probability to) is DW’s selling its stake in MGM in the open market to raise liquidity. However, this is a relatively small amount in relation to what we understand to Dubai World’s global debt payments to be. In any event, we think a fire sale of DW’s interest in MGM shares (given the average daily volume, this could be done quite easily, in any event) and/or CC to be remote risks here.
