MGM Mirage to sell Treasure Island casino to Ruffin

NEW YORK/LOS ANGELES (Reuters) - MGM Mirage said on Monday it agreed to sell the Treasure Island Hotel & Casino on the Las Vegas strip to real estate mogul Phil Ruffin for a total of $775 million to help boost its liquidity.

"I'm putting my money on Vegas," said Ruffin, who last year sold the New Frontier casino for a record $1.2 billion.

"I would not be able to get a property like TI (Treasure Island) in normal times."

MGM, a major holding of billionaire Kirk Kerkorian's Tracinda Corp, in October reported a 67 percent drop in quarterly profit.

Casino companies have been hit hard over the past year by slower consumer spending and tight credit markets. MGM's shares, which had plummeted from $86.75 a year ago, were up about 7 percent to $11.47 in afternoon trading.

The company is in the process of lining up final financing for its massive $11.2 billion CityCenter project on the Strip.

Standard & Poor's Ratings Services said its BB-minus rating on MGM's debt was unaffected by the agreement to sell the Treasure Island property.

"This transaction creates value to our stakeholders through significantly increased liquidity and enhanced financial flexibility," James Murren, chairman and chief executive of MGM Mirage, said in a statement.

Murren recently took over the top job after the retirement of former CEO and Chairman Terry Lanni.

The purchase price for the Treasure Island Hotel & Casino will consist of $500 million in cash and $275 million in secured notes.

The price is equal to about eight times the property's estimated 2009 cash flow, Barclays Capital analyst Felicia Hendrix said in a research note.

"The sale provides MGM extra liquidity as it enters a year with significant cash requirements and it implies a valuation for MGM that exceeds the recent trading range for the shares."

The deal is expected to close by the end of the second quarter of 2009 and MGM, the world's second-largest casino operator, anticipates reporting a substantial gain on the sale.

FIZZLED

Casino companies have suffered over the past year as the gambling boom in Las Vegas has fizzled, tight credit markets have jeopardized growth plans and the Chinese government has acted to slow the Macau gambling market.

MGM, which operates 10 Las Vegas Strip properties, including the Bellagio, Mandalay Bay and Circus Circus, recently postponed development work for its MGM Grand project in Atlantic City and a planned Las Vegas Strip joint venture with Kerzner International and Istithmar.

In October, Las Vegas Strip casinos won 26 percent less money from gamblers, compared with a year earlier.

Statewide, Nevada casinos' take from gamblers fell 22 percent for October as the U.S. economic recession continued to cut into consumer spending. The state has seen gambling revenue drop for 10 consecutive months.

Ruffin, who sold the 34.3-acre New Frontier for a record $35 million an acre, is buying back into the Strip at about $15 million an acre, according to a research note from Jake Fuller at Thomas Weisel Partners.

The downturn has decimated the stock market value of gambling companies.

Shares of Las Vegas Sands Corp have declined to about $6 from more than $118 a year ago, while shares in Wynn Resorts have plunged to less than $41 from $124 in February.

(Reporting by Mark McSherry, Editing by Maureen Bavdek, Dave Zimmerman, Leslie Gevirtz)