March 17 (Bloomberg) -- MGM Mirage, the casino operator controlled by billionaire Kirk Kerkorian, said auditors questioned its ability to stay in business as the company won a two-month bank reprieve to restructure its debts.
Auditors raised “substantial doubt” about MGM Mirage’s ability to continue, the largest casino owner on the Las Vegas Strip said today in a regulatory filing. The company also reported a $1.15 billion fourth-quarter loss after writing down properties because of shrinking gambling revenue.
The auditor’s comments increase the likelihood MGM Mirage will seek bankruptcy protection from creditors. Banks granted waivers on the $7 billion bank-loan facility until May 15. The company said on March 3 it was in talks to avert a potential breach of covenants.
In exchange for the temporary covenant waivers, MGM Mirage is prohibited from prepaying or repurchasing other long-term debt or selling assets, the filing said. The company will also repay $300 million of the fully drawn revolving loan, and accepted a 100-basis-point increase in the interest rate.
MGM Mirage can also only fund construction of its Las Vegas CityCenter project if partner Dubai World also finances its half of the costs, the company said in the filing. The casino company reiterated today that it will finish the project on schedule.
MGM owns a number of the biggest resort hotels on the Strip, and as gambling revenues go down, each of those properties becomes significantly less valuable. For years we've heard how Las Vegas is recession-proof.
Guess not.
It's hard to imagine the Strip with a shuttered hotel, but I'm beginning to think it could happen.
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