MGM's proposed credit facility amendment would 'profoundly' impact capital structure, CEO says

By Jennifer Lanning Drey

Portland, Ore., Feb. 18 - MGM Mirage has broad support from its lenders for its proposed senior credit facility amendment and extension, a transaction that would have "a profoundly positive impact on the company's capital structure," Jim Murren, chief executive officer of MGM, said Thursday during MGM's fourth-quarter earnings conference call.

"This transaction would significantly improve our liquidity and debt profile. We would retain ample liquidity under the revolver to address our near-term maturities and retain a number of tools which would provide us with further liquidity going forward," Dan D'Arrigo, MGM's chief financial officer, said during the call.

MGM is looking to amend its $5.55 billion senior credit facility to extend the maturity of a substantial portion of the debt to Feb. 21, 2014 from Oct. 3, 2011.

The amendment would also allow the company to issue additional secured debt, and covenants would be revised.

The company expects to finalize the process shortly after the Feb. 24 deadline for lender consents, D'Arrigo said.

"It's been an objective of the board to continue to de-risk this company, de-risk our balance sheet and provide ample runway to continue to work on other operating initiatives that we have as our business is improving and as we continue to strengthen the company," Murren said.

MGM had cash and cash equivalents of $2.1 billion at Dec. 31, which included a $1.6 billion draw on the company's revolving credit facility that was repaid after the close of the year.

D'Arrigo said MGM drew the amount to increase its capacity for the issuance of potential senior secured notes under public indentures.

MGM had year-end net debt of $12.5 billion, net of the $1.6 billion draw, versus net debt of $13.5 billion at the end of 2008, he said.

At the time of Thursday's call, MGM had $1.1 billion of availability under its credit facility, reflecting the recent payment of $297 million of bonds that matured Tuesday.

More sources of liquidity

When asked during the question-and-answer portion of the call to name MGM's potential sources of liquidity over the next two years, Murren said the company has more options for liquidity available today than it did a year ago.

"That's what we've been trying to do here is create more optionality for the company," he said.

Specifically, Murren said first and foremost, MGM expects to increase free cash flow over the next several years, which will be applied toward deleveraging the company.

The CEO also mentioned possible sources of liquidity including going public with MGM Macau, corporate finance options related to CityCenter and MGM's ability to access the capital markets.

"We're at a point in time where nothing is off the table, but we would prioritize what is in the best interest of our stakeholders," Murren said.

Light at end of tunnel

While the environment for MGM remains challenging, Murren said Thursday that he sees light at the end of the tunnel.

On a same-store basis, the company's fourth-quarter net revenue decreased 6% to $1.5 billion, compared with a 9% year-over-year decrease in the third quarter.

Casino revenue decreased by 7% in the fourth quarter.

The company posted a fourth-quarter net loss of $433.92 million, compared with a $1.15 billion loss in the same period of 2008.

MGM Mirage is a Las Vegas-based gaming, hospitality and entertainment company.

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