Sour market takes toll on major gaming companies

Oct 7, 2008 5:01 PM

Industry Insider by Ray Poirier | While one gaming guru was telling people that the country was going down the tube and that they should cash in the stocks, the majority were advising that investors "stay calm and stay invested" because the financial markets would eventually correct themselves.

Neither piece of advice was easy to accept: on the one hand, selling into the tanking market meant that most people would take a major loss, while sitting tight was difficult because of the heartburn caused by the slumping share prices.

One publication, after crowing that it forecast trouble for gaming stocks in November of last year, pointed to the need for capital required to complete the growth plans of MGM MIRAGE Inc. (MGM), Las Vegas Sands Corp. (LVS) and Wynn Resorts Ltd. (WYNN). And, finding cash anywhere in the world is tougher than hitting the Pick Six at Santa Anita, it was noted.

Still, on Monday, MGM MIRAGE announced that it had completed the first phase of its $3 billion financing package for the construction of CityCenter on the Las Vegas Strip, a project that it shares with Dubai World.

The first phase consists of $1.8 billion senior bank credit that matures in April 2013. The partners added that they planned to continue to work with additional lenders and will seek the remaining commitment amounts through a syndication process.

The project budget was given as $8.6 billion, after net residential proceeds of approximately $2.7 billion. It is expected to be completed in December, 2009.

Monday’s early market conditions seemed to point to a challenge of the previous week’s record index declines but late word of a possible major cut in the interest rate by the Federal Reserve later this week turned the market around.

All the major gaming stocks fell, in keeping with the market trend in early trading but recovered somewhat prior to the close.

LVS and MGM fell nearly 10% for the day, closing at $20.85 and $19.00, respectively, while WYNN was down $2.65 at $67.77.