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MGM Mirage may default on debt

The casino company says it will breach financial covenants if adverse conditions in the economy and gaming industry continue.

March 04, 2009|Bloomberg News

MGM Mirage, the casino company majority-owned by billionaire Kirk Kerkorian, said Tuesday that it might not be able to stay in compliance this year with financial covenants under its senior credit facility.

Failure to comply would mean defaulting under debt agreements, MGM Mirage said in a regulatory filing. The Las Vegas company also postponed filing its fourth-quarter and annual report until as late as March 17.

MGM Mirage said it believed it would breach the financial covenants "if the recent adverse conditions in the economy in general -- and the gaming industry in particular -- continue," according to the filing.

Gambling revenue in Las Vegas fell the most on record last year, causing declining sales at MGM Mirage, the owner of 10 casino resorts in the city. MGM Mirage said last week that it had borrowed the remaining $842 million in its revolving credit facility.

The company said Tuesday that it was negotiating with senior creditors for a covenant waiver or amendment. A majority of the lenders could accelerate repayments and exercise default rights under certain circumstances if a deal isn't reached, the company said.

MGM Mirage shares fell 28 cents to $2.34 in late trading after the filing. The shares had closed down 43 cents at $2.62.

New Chief Executive James Murren agreed in December to sell the company's Treasure Island casino, postponed the opening of a hotel and canceled a condominium development at the CityCenter joint venture with Dubai World to save cash.

In other news involving Kerkorian, former DaimlerChrysler shareholders were allowed to sue the billionaire as a group over claims that he sold more than 7 million of the carmaker's shares in 1999 based on inside information that its cash flow was declining.

U.S. District Judge Florence-Marie Cooper in Los Angeles, in an order filed Feb. 13 and unsealed Monday, certified a class of shareholders who bought DaimlerChrysler common stock on nine dates from March 19, 1999, to June 11, 1999. The suit against Kerkorian and his Tracinda Corp. investment company was filed in 2003.

The shareholders allege that James Aljian, who helped manage Tracinda's investments and served on DaimlerChrysler's shareholder committee board, passed confidential information about the company to Kerkorian in 1999.

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