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MGM Resorts says CityCenter will have $45 million operating loss in fourth quarter
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Jeff Scheid/Las Vegas Review Journal
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LAS VEGAS REVIEW-JOURNAL
MGM Resorts International said Monday that its CityCenter development had a net operating loss of roughly $45 million in the fourth quarter, but saw revenues increase roughly 4 percent.
The company, which owns the 67-acre Strip complex in a 50-50 partnership with Dubai World, preannounced quarterly earnings for CityCenter on Monday when it unveiled plans to refinance $240 million in debt.
In a statement, MGM Resorts said it plans to refinance the debt through a private placement and said the funds, along with cash on hand, would be used to pay off $300 million of CityCenter's $2.5 billion debt.
Earlier this month, MGM Resorts said it was amending its financing for portions of CityCenter debt to extend maturity dates by a year, to 2015.
JP Morgan gaming analyst Joe Greff called the refinancing a "prudent, opportunistic move" given that the credit markets have seemingly loosened in recent months.
"In our view, this further increases MGM's financial flexibility following previously disclosed actions that, collectively, enhance equity value," Greff told investors.
Union Gaming Group principal Bill Lerner said the refinancing should remove some restrictive covenants from CityCenter's debt and provide better financial flexibility to the development's balance sheet.
Fitch Rating Service gaming analyst Michael Paladino was also positive on the refinancing, saying the transaction would "allow CityCenter to accumulate an additional cash cushion."
MGM Resorts said CityCenter, which includes the 4,000-room Aria hotel-casino, would have net revenues of $269 million during the quarter ended Dec. 31, up from $257 million during the fourth quarter of 2010.
Meanwhile, CityCenter had an operating loss of roughly $45 million, down from an operating loss of $104 million in the 2010 fourth quarter.
MGM Resorts plans to release fourth-quarter and year-end earnings Feb. 22.
Susquehanna Financial Group gaming analyst Rachael Rothman told investors that CityCenter's fourth-quarter revenue bodes well for the company's fundamentals, however, "the larger-than-expected operating loss puts a negative bias on estimates."
Analysts focused on CityCenter's cash-flow estimates for the quarter, reported as earnings before interest, taxes, depreciation and amortization, which is expected to about $54 million, 10 percent above expectations.
"While we believe the (cash flow) result is somewhat negatively hold influenced, we anticipate the news will be well received," Deutsche Bank gaming analyst Carlo Santarelli told investors.
Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.
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Ask Harry Reid. He'll tell you it's George Bush's fault.
City Center losing 45 mil? Caesars tens of Billions in debt and a recent embarrassing IPO Stock release? And the Cosmopolitan just announced recent layoffs? Who says things are fine and dandy in Las Vegas?
Howdy--Southside Teddy: Well Thanks. I tempered this comment somewhat--not too much "gruff." I, generally, wait for the right opportunity to lay out a few, unpublished, publicly available facts. Just a matter of time. Will be looking out for your comments. Take care.
Great story,eye-on-vegas, you should work for the RJ, Lots of fluff .
JR: Remember. MGM's properties are subsidiaries. The debt is secured by the underlying property or the property itself. They are set-up this way for divisional purposes, tax reporting and like you alluded to bankruptcy or insolvency. Right now the debt is at just over 2 to 1. We would have to check the financials, closely, to see how much principal is being paid down. As a consequence, as you known, most public casino companies come out smelling like a rose after a bankruptcy--partly due to this simple structuring--out with the poor performers and retaining the heavy hitters. MGM representatives tend to report debt based on their "credit facility." It is just a "term of art" meaning how they are strategizing their debt commitments and extensions. What we read about is mostly extensions. To analogize it is similar to a consumer maxing out a credit card and then acquiring another then maxing it out and in the end extending ones debt until the interest can no longer be paid. This is why the Dubai group received half of CityCenter at an unconscionably low market price--so that MGM could make an interest payment.
This is Murren's disaster all the way. A real game changer, one that will probably drive the company right into bankruptcy.
why do the banks keep letting theses casinos operate with billions in debt ? try being a local home owner or a business with debts the bank wants there money right away
Where's my bailout? I'm looking for a cheap, executive rental.
Victor.Newman: To answer your question--he is a one of the members of board. Should be a nominee again this year. Check the 2012 proxy for some exciting readin (when it's published). Just the facts; no, opinion here.
How does City Center CEO Bobby Baldwin keep his job?