Parties encounter delay in CityCenter financing - Business

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Jul. 30, 2008
Copyright © Las Vegas Review-Journal

Parties encounter delay in CityCenter financing

By OSKAR GARCIA
THE ASSOCIATED PRESS

The CityCenter construction site is seen April 4 on the Strip. An executive expects a deal for financing $3 billion of the project soon.
Photo by Jeff Scheid.

MGM Mirage Inc. and partner Dubai World have run into delays in securing more than $3 billion in financing for a $9.2 billion Strip casino project, but expect a deal to be done in the coming weeks, an MGM Mirage executive said Tuesday.

MGM Mirage chief financial officer Dan D'Arrigo told The Associated Press that he expects no delays for the construction and planned late 2009 opening of the mixed-use CityCenter complex.

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"I don't think it's any surprise to anyone that the financial markets are not what they once were," D'Arrigo said. "The credit crunch is real, and it's one that we -- like any other company out there looking to raise capital -- have to deal with."

D'Arrigo said MGM Mirage had told investors it hoped to complete project financing by June or July, but said banks are much more guarded with capital commitments given the U.S. economy.

"A lot of banks are not looking to use their balance sheets right now if they don't need to and would rather preserve capital," D'Arrigo said.

He said the company has talked to about a dozen banks about the loan package; about half have committed to it.

Moody's Investors Service, a financial research company that rates the credit of commercial borrowers, announced earlier this month that MGM Mirage's ratings were on review for a possible downgrade, in part because of the uncertainty of CityCenter's financing.

The review was part of a series of moves affecting Moody's ratings of several casino companies that operate in Las Vegas, driven by declining gambling revenue.

CityCenter -- which MGM Mirage officials have called the most expensive private commercial development in U.S. history -- is expected to include six high-rise towers with a 4,000-room hotel-casino, condominiums, boutique hotels and a retail, dining and entertainment complex.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. James wrote on July 30, 2008 10:36 PM: The Review-Journal should be ashamed that it permits anonymous comments from the ill informed on its news stories. You folks are clueless fools with no balls. Las Vegas would have never been built if it was up to naysayers like you. ron wrote on July 30, 2008 05:26 PM: The City Center project is at least halfway constructed, moving ahead full-steam (the construction workers are doing overtime), and over half of the condominiums have already been sold (at $500,000+ apiece). With cash flow of $1.5 billion this year, MGM will get the loan they seek. Business has always moved in cycles,and after a slow-down, Las Vegas always soars ahead stronger than the average city and industry. With a Share Price that has dropped from $100 last year and a Price to Cash Flow ratio of only 6, MGM is way undervalued. Cash Flow per share has increased 6-fold over the past decade and this rate should continue. They are also well-positioned for international expansion and they are a prime candidate for a private buyout (like Harrah's). This stock will double by the time City Center opens. The publicity for this project will be extraordinary... never before has anyone attempted to basically build an entire city at once, and this 'city' looks exciting and luxurious, with a license to print money (the casino). Go see the building models and the room models (at Mirage, The Hotel, or at the sales office at LV Blvd. / Harmon). I am not involved with MGM, but I know stocks and this one is an astonishing bargain for those with patience. David wrote on July 30, 2008 02:43 PM: Gee, I hope this doesn't affect the bonuses of Terri Lanni and his like. After all, the employees worked so hard to get this far and Terri deserves to be rewarded for his employees sweat. bob wrote on July 30, 2008 02:15 PM: will be another stratsophere, half finished...... shouldnt they get the financing before building?? Hello!!!!!!! mike d wrote on July 30, 2008 12:21 PM: we really don't need any more bad news in vegas. this is just a bleep in business. i am sure they will get the financing. Not a fan wrote on July 30, 2008 11:15 AM: I hope that this wreaks havoc with the MGM/MIRAGE advertising agencies. These agencies have been charging huge retainers for their "work". I think those days are going BUH BYE. Hoover wrote on July 30, 2008 09:15 AM: "Once I built a railroad, far and wide, watched as it raced time, once I built a building to the sky, now its done, Brother can you spare a dime?!" Better learn the lyrics to this song brothers and sisters, you are gonna need it! Tom Best wrote on July 30, 2008 07:40 AM: Imagine building a house, getting it half done, and then realizing that you don't have the money to finish it. So you go out, hat in hand, and try to borrow the remainder. You know the banks will stick it to you, so you go to the mob. Yes, they might give you the money, but "you owe them" now. House = MGM Mob = Dubai, Saudi, etc.