Yesterday saw some intemperate spluttering in newspaper comment threads, along the lines “How dare the Wall Street Journal report the news? It might damage stock prices!” (One 
hothead even bruited the possibility of a libel suit.) All of which was predicated on the assumption — and we know what happens when we assume — that the WSJ was merely chasing rumors when it reported that Carl Icahn and Oaktree Capital Management were putting the squeeze on MGM Mirage, trying to steer it into bankruptcy. (Some — including The Economist — think a CityCenter-driven bankruptcy is inevitable, regardless.)
Undeterred, the WSJ is back with the full story today and it’s the real deal. Icahn and Oaktree are not acting in concert and their agendas are different. Icahn is thought to be angling for a piece of the company while Oaktree likes MGM the way it is, if only it could “clean up its balance sheet.” Were they able to force the bankruptcy issue, their rights would supersede owner Kirk Kerkorian‘s and regime change would surely follow.
But that presupposes a great deal … not the least the ‘great deal’ MGM got from its bankers when it was able to borrow $7 billion unsecured. Also, crunch time is still a long way off. Icahn and Oaktree’s best chances for bending MGM to their will won’t come until July or October, when an aggregate $1.5 billion in bonds must be repurchased. In order to prevail, either Oaktree, Icahn or both would have to thwart that repurchase, presumably by refusing to tender their bonds. But MGM still has a few cards to play in the meantime.
Across the Pacific, Bloomberg has the skinny today on what went down at Sheldon Adelson and Stanley Ho‘s secret lunch at Venetian Macao earlier this week and a subsequent summit meeting yesterday. (Melco Crown Entertainment CEO Lawrence Ho joined the oligarchs, as did MGM Grand Macau co-owner Pansy Ho, along with a local proxy for Wynn Resorts).*
It seems that detente is the word for the day, with the two ancient enemies agreeing to forego their arms race in favor of cooperation. Or, as the 87-year-old Ho put it, “Everyone agreed not to compete, to have enough rice to eat and to get more taxes for the government.” (Adelson was uncharacteristically mum.)
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… where the elite meet.
Considering the “cutthroat competition” (as Ho once put it, shortly after some junket operators had their throats slashed) that’s prevailed so far in Macao, this new entente cordiale sounds like something that’s going to be far easier said than done — especially when the market begins to rebound. The latter already shows signs of bottoming out. MEAG Hong Kong Ltd. Investment Director John Koh speculated prior to Thursday’s superpower meeting that the Adelson/Ho accord would mandate:
• one standard rate for junketeer commissions
• a salary freeze
• a hands-off policy toward one another’s VIP players hosts and/or key executives
Since Adelson has several Cotai Strip™ projects — including a St. Regis and a Shangri-La — gathering rust, could his sudden amity with the Ho clan be a means of courting bailout money? And how would the Macanese government — to say nothing of Steve Wynn — react to the prospect of a polyamorous alliance betwixt SJM, Las Vegas Sands, Melco International and Ms. Ho’s Shun Tak Holdings, say? Such a hyrda-headed oligopoly would give competitors a great deal to worry about and seems far from inconceivable, given the desperate circumstances of certain of the parties involved.
*–Galaxy Entertainment seems to have been conspicuous by its absence, but that underachieving company has other Koi fish to fry. The fact that Galaxy is writing down the value of its license, though, says less about the Macao market than about Galaxy and its failure to make substantial inroads, despite being one of the first companies on the scene.
