The trajectory of MGM’s (MGM) stock (down 75% from its 52-week high) mirrors that of Las Vegas as a whole. So it should come as no surprise that banks, in the midst of a credit crunch, aren’t thrilled about handing money out to casinos. Bloomberg:
MGM Mirage and Dubai World are late in raising as much as $3.5 billion for their $11.2 billion CityCenter project [pictured] in Las Vegas because banks saddled with debt to casinos and hotels are wary of making new loans.
So what are MGM and Dubai’s options if the financing fails? The CityCenter project actually relies mostly on equity capital, so both parties can simply increase their contributions. However, that clearly isn’t the desired outcome:
Increasing the equity contribution would leave less capital for future projects and could lower MGM’s credit rating, said Peggy Holloway, a senior credit officer at Moody’s Investors Service in New York. Moody’s put MGM’s debt under review for downgrade earlier this month, reflecting the need to complete the CityCenter financing and the “challenging operating environment in Las Vegas.” MGM is rated Ba2, the second-highest junk rating.
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