MGM still locked & loaded

April 01, 2008 7:00 PM
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Gaming Insider by Phil Hevener | It’s a sickness with an impact that won’t go away any time soon.

MGM’s President Jim Murren says the circumstances that collapsed Wall Street banker Bear Stearns are symptoms of "a disease" that has seeped through the gaming industry’s most dependable sources of big money.

The consequences of past bad deals are blowing back in the faces of financial market dealmakers.

And what we’ve got here is a mess, the former Wall Street analyst says. For a handful of resort companies fortunate enough to be in the right place at the right time there may be good news, but we’ll get to that in a moment.

Murren doubts that the consequences of the disease – the skepticism, even fear that has ravaged the strategies of companies in search of financing, will fade any time soon, probably remaining as a factor in decision-making through most of this year at a minimum.

Which explains the growing list of development projects that have been officially tabled, moved to some kind of back burner, or become subjects that their respective sponsors are very reluctant to discuss.

The Bear Stearns debacle by itself will not have any effect on gaming, according to Murren, because Bear had not been among the major players recently underwriting gaming projects. But the collapse, he continues, has been a highly visible reminder of the disease riddling financial markets. The bond market had already disappeared and banks have become unable or unwilling – sometimes both – Murren says, to loan money to borrowers with anything but a triple A platinum plated credit rating.

Companies like MGM, perhaps?

Well, yes, is the attitude he projects in a low-key way, pointing to the $2.5 billion bank credit facility of 2006, the biggest ever negotiated by a gaming company at the time.

Try doing something like that in today’s world, he seems to say … or maybe that’s just my imagination.

Then there is the deal with MGM’s new best friends in the Middle East. MGM sold off a 50 percent equity interest in CityCenter to Dubai World, a deal that netted another $2.5 billion.

And if things were to turn really sour for some reason, Murren adds with a straight face, "There is always our ace in the hole (majority shareholder) Kirk Kerkorian."

With a line-up of assets like that, perhaps MGM will keep its corporate eyes open for a prudent purchase or two. It seems possible … even likely.

This is obviously a time to consider the timely acquisition of additional assets when a company is lucky enough to remain standing – make that thriving – among the diminishing number of companies with that option.

But Murren is not giving anything away. Whatever will be, will be, if and when the time is right. Some of the company’s current high priority agenda items have come up in a hurry, as Murren and Chairman Terry Lanni have previously explained.

The north Strip joint venture with Sol Kerzner is an example of that.

And so Murren carefully studies the changing landscape, knowing that if he spots one of those tantalizing possibilities, finding the money will not be a problem.

To paraphrase Pinnacle Entertainment’s Dan Lee, or is it Kenny Rogers: You gotta know when to hold them, know when to fold them and, last but not least, know when to bet big.

Hail Caesars! Sorry, Bill

How long do you think it will be before Harrah’s Entertainment cuts to what makes sense and changes the company’s name to Caesars?

It’s a name gamblers have respected for years.

The company must employ thousands of younger workers who have no idea what a Harrah’s is. An old time gambler, they’ve probably been told.

But what does that mean in today’s global village? It has been a long time since Harrah’s was a company that existed only within the borders of Nevada.

It’s Caesars that is getting the big upgrade in Las Vegas, what with the new tower that is on the way. It’s the Caesars name that will be featured on new developments around the world.

Putting the Caesars name on top of the company is a change that makes sense as CEO Gary Loveman and the company’s new owners consider the things to be done.