By Deena Beasley
LOS ANGELES (Reuters) - A plan for the restructuring of MGM Mirage
Another source said MGM and Dubai World have agreed to a set of terms that would ensure the completion of CityCenter, their jointly owned project on the Las Vegas Strip. The deal has yet, however, to be approved by banks providing financing.
"This is a three-way negotiation," the source said. "Banks are being asked to amend terms" of a $1.8 billion facility slated to become available in June.
The agreement does not involve bringing in another partner for the $8.7 billion project, the source said.
Under current terms, a debt default by MGM would trigger a default on the CityCenter loan. MGM has been talking since late last year of lowering its $13.5 billion debt load through actions like asset sales and restructuring.
"We continue to have productive conversations with our partners and lenders," said MGM spokesman Gordon Absher. Dubai World declined to comment.
The potential CityCenter deal is "somewhat bearish" for the stock, in that it may put a "ring-fence" around CityCenter, making any future bankruptcy filing by MGM less of a risk to the partnership, according to an MGM investor who was not authorized to speak on the record.
Icahn said during an interview with CNBC that there might be some merit in restructuring MGM, but he does not "in any way intend to be in a fight with Kerkorian."
He also said there are a lot of problems in bankruptcy, but sometimes it could "clean up" the situation.
Some MGM bondholders, including Icahn, have floated the idea of MGM filing for bankruptcy so that there would be no pressure to pay off its short-term debt.
"Maybe they would do a restructuring where the debtholders will have the option to own stock," the source said. Bondholders not interested in an equity position would have the option of being paid a court-stipulated valuation for their holdings.
Any deal would involve participation of Kerkorian, who owns about 53 percent of the struggling casino operator, according to the source.
Any restructuring would also likely involve the injection of additional outside capital into MGM, the source said.
MGM Mirage said earlier on Friday that it had paid contractors $70 million to keep construction going at CityCenter, including the $35 million that should have been funded by government-owned Dubai World.
The payment was the second time MGM covered construction costs due from Dubai World, which last month filed a lawsuit against its partner, citing mismanagement and cost overruns.
MGM, struggling with the twin pressures of weak gambling demand and the disappearance of bank credit, has received temporary waivers from lenders allowing it to make the CityCenter payments and exempting it from loan covenants.
A source with knowledge of the matter told Reuters earlier this week that Dubai World would continue to withhold payments from the project until a comprehensive finance package is obtained.
The next $200 million construction payment is due at the end of the month. The multi-tower City Center is slated to begin a phased opening in October.
MGM Chief Executive Jim Murren said in a statement that the company continues to review all options to keep CityCenter fully funded.
Bank of America
Shares of MGM rose 40 cents, or 6.8 percent, to close at $6.30 on the New York Stock Exchange, after falling as low as $4.81 in earlier trading.
(Reporting by Deena Beasley; Editing by Richard Chang, Bernard Orr)
