Friday, February 27, 2009

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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