Moody's downgrades MGM

Moody's Investors Service said it downgraded MGM Mirage's probability-of-default rating to Caa3 from Caa2, corporate family rating to Caa2 from Caa1, senior unsecured notes to Caa2 (LGD3, 33%) from Caa1 (LGD3, 33%), senior subordinated to Ca (LGD5, 85%) from Caa3 (LGD5, 85%) and senior secured notes affirmed at B1 (LGD2, 12%).

The outlook is negative.

The downgrade reflects the very short-term - through May 15, 2009 - of the waiver of potential covenant defaults that the company received from its bank lenders, according to the agency.

It also reflects the $300 million reduction in cash MGM was required to use to repay a portion of the company's revolving credit facility, the agency said.

"Because of these factors, there is a rising probability that as part of a restructuring MGM will have to offer to exchange existing debt for an amount below par as part of any plan to alleviate its liquidity crunch," Moody's senior analyst Peggy Holloway said in a statement.

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