UPDATE: MGM Gets Strong Initial Response To $1.08 Billion Debt Tender
May 28 2009 - 11:13AM
Dow Jones News
MGM Mirage (MGM) reported a strong response to its offer to
repurchase $1.08 billion of notes maturing later this year as
investors look to take advantage of an early participation
premium.
While the positive reception for the deal isn't seen as a game
changer for the casino operator, some analysts say it's a good sign
for MGM Mirage's restructuring process aimed at strengthening its
balance sheet.
"It's a good first step," said Dennis Forst, an analyst at
KeyBanc Capital Markets. "There's still a lot of work to be done
before they're out of the woods."
Amid broader market declines, the company's stock recently fell
7 cents, or 1%, to $7.16 after gaining in pre-market trading.
The highly leveraged casino operator is pushing to pay off
near-term debt, recently selling $1.5 billion in notes and $1.15
billion in stock to help do so. The deals will help pull the
troubled casino operator from its dangerous debt quagmire, while
removing the need for forced asset sales and distressed debt
exchanges.
MGM amended its senior credit facility in mid-April to allow it
to pay the full construction costs on its Las Vegas City Center
project. Investors had been concerned about a possible default on
the credit pact after MGM's auditor raised doubts about its ability
to continue as a going concern.
Chairman and Chief Executive Jim Murren said at the time the
sales marked a "new beginning" for the company. He added MGM is in
a good position to continue with the work needed to improve
profitability.
Holders of the notes in the tender offer had until 5 p.m. EDT
Wednesday to take advantage of the premium, $30 per $1,000 of
notes. Those who ultimately tender their notes by the June 10
deadline but didn't do so by Wednesday will get $970 per $1,000 of
notes, not face value as those tendering early will.
By the deadline, 54% of the $226.3 million in notes that mature
July 31 were tendered, as were 93% of the $820 million in notes due
Oct. 1.
-By A.D. Pruitt, Dow Jones Newswires; 201-938-2269;
angela.pruitt@dowjones.com
(Mike Barris contributed to this report.)