Moody's Takes MGM To Woodshed

Rating agencies just love reminding people they are still around. Oh well - for all CLOs who still base their investment strategy on these pentagram based reports, Moody's downgraded MGM Mirage's corporate family rating from B1 to B3, which "reflects the difficulty the company faces in shoring up its liquidity profile." Not at all surprising after this morning's revolver draw down news and the pounding MGM bonds have taken today (down 3-4 points). Some more harsh language here:

Moody's estimates that internally generated cash, net proceeds from the pending sale of Treasure Island together with the revolver draw and cash on hand will be barely sufficient to fund the company's operations -- including its CityCenter obligations -- and required bond maturities through year-end 2009. MGM faces bond maturities of approximately $300 million and $800 million in the second and third quarters of 2010, respectively. Additionally, the inability of the MGM and its joint venture partner, Dubai World, to raise the remaining $1.2 billion of the targeted $3.0 billion debt raise for CityCenter has exacerbated the MGM's liquidity situation.

We are all waiting for the day when the presidential suite in the Bellagio costs $99.95 including the bottle of champagne and the "personal attention" the suite is known to provide to its guests. Sphere: Related Content

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MGM In Yet More Trouble

In an 8-K filed early today, MGM announced that on February 24 it had requested a full drawn down on its $4.5 billion revolver, which the banks satisfied yesterday. The reason for the request was "the continuing instability in the capital markets and uncertain state of the global economy" although we would add the even more atrocious state of Las Vegas operations was likely the most immediate culprit. As we reported previously, Kirk Kerkorian via holding company Tracinda, was separately pledging a bulk of his MGM stock as collateral under an MGM credit line. After considering the recent disastrous results from Wynn, this is further evidence of the utter collapse of the Las Vegas gaming market, and the increasing likelihood of a substantial liquidity crunch for all major casino owners on the strip.

The full text from the MGM 8-K follows:

On February 24, 2009, MGM MIRAGE, a Delaware corporation (the “Company”), submitted a request to borrow $842 million under its $4.5 billion senior revolving credit facility, which amount represented, after giving effect to $93 million in outstanding letters of credit, the total amount of unused borrowing capacity available under its $7.0 billion senior credit facility. The borrowing request, which was fully funded as of February 26, 2009, was made in light of the continuing instability in the capital markets and uncertain state of the global economy. The senior credit facility is governed by the Fifth Amended and Restated Loan Agreement (the “Fifth Loan Agreement”), dated October 3, 2006, by and among the Company, MGM Grand Detroit, LLC, a Delaware limited liability company, as initial co-borrower, and the lenders named therein, as such Fifth Loan Agreement was amended by Amendment No. 1 thereto (“Amendment No.1”) on September 30, 2008. The funds from such additional borrowings will be used for general corporate purposes.

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