Dubai lawsuit against MGM MIRAGE may backfire

Mar 31, 2009 5:02 PM
Gaming Insider by Phil Hevener |

So what’s up with the dudes from Dubai? Is it possible they’ve been getting some heat from Arabian Peninsula neighbors considering a bailout of Dubai’s troubled economy?

A well-connected but unofficial source outside MGM has an interesting take on recent events, speculating there may be some grumbling among Islamic officials in other emirates or countries about Dubai’s free-wheeling investment practices, meaning the billions Dubai World has pumped into MGM’s CityCenter in the middle of (gasp!) the Las Vegas Strip.

Doesn’t this have a familiar sound to it, as in President Obama urging U.S. companies not to spend their bailout money frivolously on things like trips to Las Vegas?

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But, as another savvy industry strategist with a good feel for legalities suggested, MGM backed Dubai into a corner when it paid the $100 million due from each of the two 50 percent partners at CityCenter. Although new chapters in this drama have been unfolding almost weekly, my strategist friend says Dubai is now risking its 50-50 equity stake.

"You can argue," he maintains, "that Dubai has breeched its position in the contract … I don’t think the strategy behind the suit was very well thought out."

There is no question the action caught MGM officials by surprise, considering MGM CEO Jim Murren’s recent public comments about relationships between the partners during a recent visit to Las Vegas. Murren’s comments projected the tone of a love fest.

A recent Wall Street Journal story on the subject of Dubai’s effort to keep its high-roller approach to nearly everything from slipping away said neighboring Abu Dhabi might insist on "onerous terms" in the event of a bailout.

Stay tuned, huh?