MGM MIRAGE considers bowing out of Borgata

Jan 29, 2010 9:19 PM

It has been for some time that New Jerseyregulators have had concerns about MGM MIRAGE's (MGM) business partner Pansy Ho, daughter of gambling kingpin Stanley Ho who they say "has ties to Asian organized crime." Perhaps MGM MIRAGE has finally figured how to fix things -- pull out of their Atlantic City holdings.

According to a source of The Wall Street Journal, the company plans to divest its 50% stake in the Borgata casino resort. But will they be able to find a buyer in these troubled times?

Despite the fact that MGM has a nearly 30-year record of promising Atlantic City investments that were usually never completed for one reason or another, New Jersey officials at all levels would hate to see MGM forced to sell its half-interest in the Borgata (built and operated by Boyd Gaming on land acquired by MGM in its Mirage Resorts merger) and the door shut to further deals.

But if they do, MGM MIRAGE hopes that it could convince New Jersey regulators to drop their regulatory oversight of the company, which could cause problems with MGM MIRAGE's business elsewhere.

According to the Journal, a person familiar with the situation said MGM MIRAGE is seeking an agreement with New Jersey to avoid a hearing before the New Jersey Casino Control Commission and a potential ruling that the company isn't fit to do business in the state. Such a ruling could precipitate inquiries in other states where MGM MIRAGE operates or damp enthusiasm for a possible initial public offering of the Macau joint venture's assets on the Hong Kong Stock Exchange later this year.

Estimates ranged from an IPO that would generate $500 million to another that would develop proceeds of $1 billion. One argument against the larger number in IPO proceeds came from a Credit Suisse analyst who noted that Wynn Resorts (WYNN) and Las Vegas Sands (LVS) offered both a larger market share with current properties and hope for growth with expansion plans. This money could go a long way to relieving the company's debt from its U.S. casino holdings.

With Macau being one of the few locations where casinos are showing growth, coupled with Atlantic City's continued downward slide, the move could be a smart one.

Shut out of Macau in 2002, it was a partnership with Pansy Ho in the MGM Macau Grand that gained them entry into the lucrative market.

Ho has claimed independence from her father, who has faced charges of links to criminal elements. However, she is still managing director of Hong Kong-listed Shun Tak Holdings Ltd., which her father founded and continues to run as executive chairman.

According to the Journal, Ms. Ho also sits on the board of the holding company through which Mr. Ho controls SJM Holdings Ltd. She acquired her license from her father's SJM, which in 2004 sold its one casino "subconcession" to her joint-venture with MGM.

The Borgata's gambling revenue declined 5.9% last year. So far, there doesn't appear to be a lot of interest in buying MGM MIRAGE's share of the casino.

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