Fitch Ratings and Standard & Poor's Ratings Services downgraded several ratings for casino operator MGM MIRAGE Friday citing the weak economy's impact on Las Vegas.
The downgrades follow an announcement from MGM MIRAGE that it wants to tap $842 million of its $4.5 billion senior revolving credit agreement due to capital market and economic volatility. The company said it would use the money for general corporate purposes.
Fitch downgraded the company's issuer default rating to "CCC," or substantial risk, from "B," or highly speculative. It also downgraded the ratings for senior secured notes to "B," or highly speculative, from "BB," or speculative. Ratings for the senior unsecured credit facility and senior unsecured notes were downgraded to "B-" from "B+," both of which are highly speculative.
The ratings outlook for MGM MIRAGE remains negative, Fitch said. The downgrades specifically affect the company's $7 billion credit facility, $6.5 billion of outstanding senior unsecured debt, $848 million of outstanding senior subordinated debt, and $750 million of senior secured notes.
"Even if the company obtains waivers or amends the terms of the credit facility and is able to secure funding for CityCenter, Fitch believes the deterioration of Las Vegas trends and strained forward outlook indicates that the capital structure may be unsustainable," Fitch said in a statement.
S&P downgraded the corporate credit and issue level ratings to "B-" from "B+", both of which are highly speculative
The company has yet to report its fourth-quarter results, Fitch said, or file its annual report with the Securities and Exchange Commission, which it must do by March 2 or ask for a 15-day grace period.
"Results from other Las Vegas Strip operators indicate that the reduction in demand has continued to accelerate in 2009 from weak fourth-quarter levels," Fitch said.
Fitch also noted that Las Vegas airline passenger traffic declined 15.7 percent in January, a greater decline than the 12 percent to 14 percent decline experienced from September to December in 2008.
Shares of MGM fell 95 cents, or 21.4 percent, to close at $3.50 Friday. The stock fell to $3.40 during the after-hours session.
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