MGM Resorts gets $1.5 billion in CityCenter refinancing

MGM Resorts International said Friday a note sale to refinance a portion of CityCenter's debt came in at $1.5 billion.

The offering, made on behalf of the joint venture that operates CityCenter, consists of $900 million 7.625 percent senior secured first lien notes due in 2016 and $600 million 10.75 percent senior secured second lien notes due in 2017.

The Strip casino operator this week announced plans for the note sale to extend the due dates for the obligations and reduce the company's debt load.

In a statement, MGM Resorts said CityCenter plans to use the proceeds, combined with about $77 million in equity contributions from the partners, to lower the balance of its existing credit agreement to $500 million from $1.85 billion. The proceeds will also be used to create an interest escrow for first lien debt and to pay fees and expenses.

MGM Resorts and Dubai World, the investment arm of the Persian Gulf emirates, own the 67-acre Strip complex in a 50-50 joint venture.

The $500 million balance of the senior secured credit agreement will be extended to January 2015 under an amended agreement.

"We view the CityCenter debt refinancing cautiously considering the incremental risk it adds to MGM Resort," Jefferies & Co. gaming analyst David Katz told investors Friday. "Incrementally higher debt and interest costs coupled with low profit generation at the property and a gradual recovery in Las Vegas draws our focus to when the project will generate cash for its owners."

Shares of MGM Resorts International closed at $16.76 on the New York Stock Exchange, up 47 cents, or 2.89 percent. An analyst for Citi Group upgraded the stock from a sell recommendation to a hold rating while upping the target price by more than $5 per share.

Union Gaming Group principal Bill Lerner thought the refinancing moves were positives steps by MGM Resorts and should remove investors' concerns about the company.

"This should eliminate additional liquidity and maturity risk, asset risk, and performance risk," Lerner said. "Management can now focus on operations and other strategic initiatives."

CityCenter, which includes the 4,004-room Aria hotel-casino, nongaming boutique hotels, residential high-rise buildings, and a retail, dining and entertainment complex, was built at a cost of $8.5 billion. The project opened in December 2009 after more than five years of design and construction.

In August, the equity value of CityCenter was written down to $2.65 billion.

In November, MGM Resorts said CityCenter had net revenues of $413 million during the third quarter and cash flow of $52.4 million, the development's first positive quarter after losing money during its first six months. CityCenter posted an operating loss of $1.27 billion during the year's first three quarters.

Aria, the development's centerpiece, had net revenues of $219 million and cash flow of $41 million during that same three-month period.

MGM Resorts operates 10 Strip hotel-casinos. Company officials have said the Las Vegas market is stabilizing.

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