Another day, a little more movement in the CityCenter situation. Well, it's that or talk about tourism and gaming revenue numbers that are too depressing to contemplate for long.
Time was that the American banking industry was practically giving away money, not requiring MGM Mirage to pledge assets for collateral. Lucky for MGM, lucky for us, not so lucky for the banks. That's going to change and Liz Benston delineates the tightrope that MGM will have to navigate to keep both banks and bondholders happy — a delicate balancing act indeed. The one casino MGM can neither unload nor borrow against is New York-New York, presently encumbered with three-quarters of a billion dollars' worth of junk bonds.
Meanwhile, James Packer continues his CityCenter softshoe routine. According to Bloomberg (see sidebar), while Crown Ltd. may not be talking to MGM or Dubai World directly, it's reported to be exchanging notes in study hall with Colony Capital … hence the carefully couched denials Crown issued last weekend. Since Colony will be merely lending to MGM, not investing (assuming negotiations bear fruit), that'll spare the fund from having any uncomfortable chats with Station Casinos, which has near-Strip aspirations of its own. Besides, if MGM defaults, God forbid, Colony might find itself with a gem like Slots A Fun or maybe even Circus Circus, and could whistle Station in to run it.
The terms of the alleged deal — $750 million toward debt structuring — more than suggest that MGM has given up on any getting any more dinero out of Dubai World. If it can "clear waivers" with its lenders, it looks as though MGM's preparing to shoulder the next $800 million worth of CityCenter costs by its lonesome. Another bit of good news for Kirk Kerkorian's company is that Deutsche Bank analyst Bill Lerner has revised the EBITDA estimates of Beau Rivage and MGM Grand Detroit up a bit. Lerner's new numbers would bring the theoretical asking prices (using 7X cash flow as a baseline) to $715 million and $940 million, respectively. The question of how anybody not named Penn National is going to persuade lenders to underwrite such a deal is still begged, though.
I wonder if Barbara Cappaert of KDP Investments ever tires of having to be the one to point out the elephant in the middle of the room, namely that MGM is pawning tomorrow to pay for today. That $235 million-plus in annual Biloxi/Detroit cash flow is going to be sorely missed.
If anybody ever writes the history of the casino-hotel currently known as the Greek Isles, it'll only have one chapter … Chapter 11. The Isles has known many incarnations but it always seems to find its way back to bankruptcy court sooner or later (usually sooner). It's eked out a marginal existence for such a long time that perhaps the casino evolutionary process needs to "select out" the Greek Isles, which occupies a forlorn backwater between the Convention Center and the Strip.
Anyway, if you enjoy bankruptcy filings, this one should keep you busy. Since the Isles is more of a slot-route outpost than a casino, the alphabet soup of ownership groups is of debatable relevance to its gambling operations, though. Will the last person to leave the Greek Isles please turn out the lights.
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