MGM Mirage sees stability - Business

PRINT THIS Popular

May. 05, 2009
Copyright © Las Vegas Review-Journal

MGM Mirage sees stability

Exec: Turnaround efforts working

By HOWARD STUTZ
LAS VEGAS REVIEW-JOURNAL

$8.5 billion
cost of MGM's CityCenter project

6.5
weeks given by lenders for MGM to resolve leverage issues

30%
drop in room rates from a year ago

$105.2 million
first quarter net income

$775 million
sale of Treasure Island

$1.5 billion
overall revenues

20.1%
increase in sharesof MGM Mirage in trading Monday

No one was surprised that MGM Mirage reported a decline in net earnings during the first quarter.

That was old news.

Most Popular Stories

Fraud with Portent

Debt-ridden casino operators told to expect pressure

REAL ESTATE: Las Vegas home prices stabilize as threat of foreclosure flood wanes

GAMING COMPANY EARNINGS: Station drops $455.4 million

THE STRIP: License approved for Aria

GLOBAL GAMING EXPO: Recession over? Don't bet on it

THE STRIP: License backed for Aria

Union wants insiders to help pull Station from bankruptcy

Foreclosure wave continues

INSIDE GAMING: Missouri outburst hurts Lee, Pinnacle

Wall Street wanted to know Monday if business at MGM Mirage's nine Strip resorts was picking up.

Less than a week after a deal to save the $8.5 billion CityCenter was reached and the company was given an extra 61/2 weeks by its lenders to resolve its leverage issues, MGM Mirage Chairman and Chief Executive Officer Jim Murren told investors that convention cancellations the company witnessed in January and February had dropped off. Business levels, he said, were stabilizing.

In April, room occupancy was on par with April 2008. However, room rates were down as much as 30 percent from a year ago.

MGM Mirage Chief Financial Officer Dan D'Arrigo said in an interview the company is seeing more advance room bookings, a marked change from previous months.

"Even though it's a tough time, consumers are resilient and they want their escape," D'Arrigo said. "There are some great rates. Our stabilization efforts have taken traction."

MGM Mirage reported first-quarter net income of $105.2 million, which translated into earnings of 38 cents a share. The results included a 44-cents per share one-time gain from the $775 million sale of Treasure Island in March. The results also included a small one-time gain related to the January 2008 fire at the Monte Carlo.

In the same quarter a year ago, MGM Mirage had a net income of $118.3 million and earned 40 cents a share. Analysts polled by Thomson Reuters, who generally exclude one-time items, expected MGM Mirage to report net loss of 7 cents a share.

MGM Mirage's overall revenues were $1.5 billion, a decline of 20.2 percent from $1.88 billion a year ago.

The company announced earnings after the New York Stock Exchange closed. Shares of MGM Mirage gained $1.58, or 20.1 percent, to close at $9.44.

Most of the focus by Wall Street is on the company's corporate restructuring plans. MGM Mirage has $13.5 billion in long-term debt and has until June 30 to reorganize its finances or risk defaults that could trigger a corporate-wide bankruptcy.

How the company will go about the process has sparked debate on Wall Street.

"There is really no one-size fits all," D'Arrigo said. "We're looking at different options."

Several analysts said they wanted to see asset sales take place, such a deals for MGM Grand Detroit and the Beau Rivage in Biloxi, Miss.

In securing the $1.2 billion needed to complete CityCenter last week, the company used some of its Strip casinos to secure financial backing.

"Now that MGM Mirage has used some of its more attractive regional assets as security interests, we see a sale of these casinos as muddled," Macquarie Securities gaming analyst Joel Simkins told investors.

MGM Mirage filed a shelf registration Friday to issue stock, which enables the company to sell an undetermined number of shares.

Deutsche Bank gaming analyst Andrew Zarnett said that money from a stock sale would allow MGM Mirage to pay down its debt coming due in July and October, but might also keep the company from having to sell hotel-casinos.

"An immediate asset sale at fire-sale prices may not occur," Zarnett said. "MGM Mirage can now look to sell assets at market valuations, which are hard to determine at this time given falling (cash flow)."

Oppenheimer gaming analyst David Katz said selling casinos would raise cash in the short term, but impact how Wall Street values MGM Mirage in the long-run.

"An equity raise is a likely initiative," Katz told investors, saying a stock sale could raise between $500,000 and $3 billion.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

Share & Save

Leave Your Comment	7 Reader Comments
Terms & Conditions The following comments are provided by readers and are the sole responsiblity of the authors. The reviewjournal.com does not review comments before publication nor guarantee their accuracy. By publishing a comment here you agree to abide by the comment policy. If you see a comment that violates the policy, please notify the web editor. Some comments may not display immediately due to an automatic filter. These comments will be reviewed within 48 hours. Please do not submit a comment more than once.
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. Greg wrote on May 06, 2009 09:47 AM: Average revpar is 101, down 27 percent in the first quarter of 2009. So, the company will raise more money, stock is up around $10.00, Jim Murren states things are "on tract", as employees are (were) laid off, or working short shifts. Please..... Free Nevada wrote on May 05, 2009 10:22 AM: @dan, I didn't mention Bush43, but it's true I'd like to see a return to the days of Bush41. The two bubbles you refer to were the Internet/Dot-Com (on Clinton's watch) and Housing. The Housing bubble was primarily a result of Fannie/Freddie legislation created by the now powerful Sen. Barney Frank (D-NY). There is plenty of blame to go around (all parties/players public and private), but Bush43? Really? I doubt he even knew what a credit derivative was until they were loading up his U-Haul late last year. He's your bud dude. You do have a point about Haliburton, but all I can say is the mass casualties in Iraq and Afghanistan are horrible, but I'm glad there haven't been anymore attacks on the America's homeland, or Las Vegas in particular (save for the incoming president telling people not to come here for business conventions). Dave L. wrote on May 05, 2009 08:21 AM: MGM TITANIC: Greedlock! Love it. robert wrote on May 05, 2009 08:19 AM: Who would possibly buy this stock?I guess their all aware of the bigger fool theory.Just dont be holding the hot potato when they file bankrupcy! MGM TITANIC SAILS AGAIN... wrote on May 05, 2009 08:07 AM: "MGM Mirage has $13.5 billion in long-term debt and has until June 30 to reorganize its finances or risk defaults that could trigger a corporate-wide bankruptcy." GREAT NEWS! Let's all go down to the MGM and PARTY!!! This is the same company that has single handedly destroyed what the Strip once was. A Vacation Destination. They jump into bed with Dubai and decide (after greasing the palms at the Clark County Commission) to build HIGH RISE CONDOS all over the Strip. What an MGM GRAND idea! Start selling HOUSING in the middle of a Carnival! Won't that help traffic. Can you say GRIDLOCK? I've got another name for it... GREEDLOCK. I just made that up. Good Luck to Mr.Murren. He'll be the first one you see jumping out of one of those detachable windows at the CityCenter with his Golden Parachute heading for that pile of canoes. His bolt cutter in hand, He will ride the rapids all the way to "What a Bunch of Suckersville." Stability? Traction? "Even though it's a tough time, consumers are resilient and they want their escape," The only one to escape this disaster is Murren. He already got his. He's already gone. dan wrote on May 05, 2009 08:07 AM: I agree with Free Nevada: We can only hope and pray for a return to good old days when GW Bush was president. Bush understood that to revive the economy we had to do one thing -- shop. Also, if we give low interest loans to low income folks it will help create the next ownership society and another real estate bubble. That's what we need -- another bubble, a big, huge bubble. And another war so that companies like Halliburton can get more billion dollar no-bid contracts and take all that taxpayer money overseas. Yeah, that's the ticket. Free Nevada wrote on May 05, 2009 04:42 AM: As I see it, American consumers are being guided into a period of REDUCED CONSUMPTION like we had in the 1970s which, combined with increased competition from Atlantic City, just about bankrupted Las Vegas (anyone remember $7/night rooms at the Aladdin in like 1984?) MGM needs to plan for this. Republicans will have a chance to regain control in 2012 to stop this from happening --and it is looking pretty bright right now; but..and it's a big But, if Republicans fail again in 2012, it could be 2024 before they have another chance. (Why? Michelle Obama, Oprah, half of Hollywood, etc.) Can Las Vegas economy last until 2012 or 2024 with national policies aimed reducing consumption, increasing savings and shifting away from personal freedom (even personal automobiles!)?