MGM Mirage faces race against time

By Deena Beasley

LOS ANGELES (Reuters) - MGM Mirage (MGM.N) is racing to beat the clock as it faces a deadline to restructure its finances and Wall Street fears it is running out of options to pull it off.

The once-thriving casino operator, which owns properties from Las Vegas to Detroit to Macau, has been looking to sell assets since late last year to avoid bankruptcy, but deteriorating Las Vegas property values have made outright sales less attractive than possibly mortgaging some of its properties or raising new capital.

As the recession takes a toll on gambling getaways, MGM, the world's No. 2 casino operator, has seen profits plummet and come close to defaulting on its debt.

Last year, Chief Executive Jim Murren said all options for the company were on the table as MGM manoeuvred to trim its debt while completing financing for its $8.7 billion (6 billion pounds) CityCenter joint venture on the Las Vegas Strip.

But analysts fear MGM now has fewer options for hiving off assets at prices above fire-sale levels.

The casino operator has talked to potential investors, including Los Angeles-based private equity firm Colony Capital LLC, which is mulling offering a mortgage to MGM that would be secured by a casino, a source with knowledge of the situation said.

"We believe MGM favours keeping its assets and offering them as collateral to its current lenders or new senior lenders as opposed to asset sales," Barclays analyst Felicia Hendrix said in a research note on Tuesday.

Officials at MGM, which has about $13.5 billion in outstanding debt, did not respond to requests for comment.

PROPERTIES GALORE: BUT ARE THEY ENOUGH?

Murren said in a meeting with investors on Wednesday that the bulk of the asset work will be done within the next 90 days and the company would not do deals with buyers who require financing or whom the company deems questionable for licensing, JP Morgan analyst Joe Greff said in a research note.

So far, MGM has sold its Las Vegas Strip Treasure Island resort to real estate investor Phil Ruffin for $775 million. The sale, announced in December, closed in March.

It still owns nine Las Vegas Strip properties, ranging from the Bellagio to Circus Circus, as well as casinos in Detroit and Biloxi, Mississippi, and joint ventures in Atlantic City and China's Macau.

But as property-level cashflow drops -- especially in Las Vegas -- MGM's after-tax return on a property sale may not be enough to lower its debt-to-cashflow leverage.

Nevada reported on Tuesday gamblers lost about 19 percent less money to Strip casinos in the first two months of 2009.

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