Casino operator MGM MIRAGE said Wednesday that it agreed with partner Dubai World and the pair's lenders to finish an $8.5-billion casino complex on the Las Vegas Strip.
MGM MIRAGE said Dubai World, the investment arm of the Dubai government, would drop a lawsuit it filed against the Las Vegas-based casino company, which is majority owned by investor Kirk Kerkorian.
The pact secures MGM MIRAGE's payment obligations for construction costs with its Circus Circus Las Vegas casino and adjacent land. The company said CityCenter is now on track to be fully open by December 2009.
MGM MIRAGE, which has been struggling under more than $13 billion in debt, also said it reached a separate agreement with its own lenders to waive its payment obligations until June 30, extending a prior agreement by one and a half months.
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MGM MIRAGE Chief Executive Jim Murren said the 45-day extension gave the company "more than enough time" to come up with a comprehensive plan to fix its balance sheet.
"This was the best possible outcome," Murren said.
To get the extension, MGM MIRAGE paid back $100 million under its revolving credit facility and secured $300 million of its debt with its Gold Strike Tunica casino in Mississippi and undeveloped land on the Las Vegas Strip. It also put up its MGM Grand Detroit casino as collateral for the rest of its credit facility.
Other key terms of the agreement include:
• When net proceeds from condo sales top $243 million and/or the budget exceeds the current $8.5 billion, MGM will be responsible for payments necessary to complete the project.
• CityCenter credit facility instruments will reach maturity in June 2012; the interest rate margin will increase by 200 bps (which will be treated as PIK interest).
• Condo proceeds up to $250 million can be used to pay construction costs; if proceeds top that level, 30 percent of excess will be used to reduce outstanding CityCenter debt.
All the deals are subject to approval by gambling regulators, the company said.
MGM MIRAGE received what it called an irrevocable letter of credit for $224 million to secure its payments for CityCenter, which the casino company has touted as the most expensive private commercial development in U.S. history.
As part of the deal between the partners, Dubai World agreed to repay $135 million in construction costs it owed that MGM MIRAGE has paid on its behalf.
Under that pact, MGM MIRAGE also agreed to pay any completion costs if the project goes over its current projected budget of $8.5 billion. That figure has been coming down from as high as $9.2 billion in recent months as MGM MIRAGE cut costs, modified the project and renegotiated with its contractors.
Murren compared the stress of working through this process with Dubai World to what he imagines goes on in other board rooms and in other situations around the world each day.
"At all times the partnership has respected one another," Murren said, in spite of the lawsuit. "At all times we have treated each other with a great deal of maturity."
MGM MIRAGE shares halted trading about 45 minutes before the market's close Wednesday as the company prepared its announcement. They ended at $6.18, up 38 cents or 6.6%.
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