Monday, March 23, 2009

MGM Mirage's Troubles Just Keep Growing

The latest sucker punch against what has become the Las Vegas Strip Pinata comes from MGM Mirage's very own partner in the CityCenter development, Dubai World, and specifically the Infinity World subsidiary. The latter claims MGM has defaulted on the terms of their JV, and has filed a lawsuit against the casino operator in Delaware Chancery. According to the emailed statement, the going concern language in the 10-K filed on March 17 "constitutes a breach of the CityCenter joint-venture agreement and puts the CityCenter development project at risk."

Dubai World has some serious allegations against MGM:
"MGM has mismanaged the CityCenter project, resulting in costs significantly over budget despite downsizing certain of the facilities. This has caused Infinity World to make capital contributions far in excess of the levels originally estimated y MGM. Essentially it is being asked to pay significantly more and getting less, with only uncertainty about MGM's future.”
Among things Dubai World is seeking in the lawsuit are "declaratory judgment and other measures that would relieve Infinity World of its obligations under the JV agreement resulting from MGM's breach."

It is not immediately clear if Infinity World will seek to recoup the $4.3 billion invested in CityCenter if negotiations with MGM to resolve issues do not progress. The letter points out that MGM has invested a total of $8.8 billion in this peak market construction remnant. Regardless, a lawsuit is the last distraction MGM needs at this point as it is fighting to do all it can do prevent a terminally worse outcome for itself and its creditors and stockholders. Sphere: Related Content
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