April 17, 2009 / 8:37 PM / 10 years ago

UPDATE 1-MGM Mirage, Dubai reach deal on CityCenter-WSJ

* Plan said to still need lender approval

* MGM shares close up 6.8 percent

LOS ANGELES, April 17 (Reuters) - MGM Mirage (MGM.N) and Dubai World have agreed to a set of terms that would ensure the completion of CityCenter, their jointly owned project on the Las Vegas Strip, the Wall Street Journal reported on Friday, citing a person with knowledge of the talks.

Officials at MGM and Dubai World did not immediately return requests for comment.

The plan must now be approved by the project’s lenders, who hold the key to a $1.8 billion loan needed to finish construction, according to the Journal.

MGM Mirage said earlier on Friday that it had paid contractors $70 million to keep construction going at CityCenter, including the $35 million that should have been funded by government-owned Dubai World.

MGM, struggling with the twin pressures of weak gambling demand and the disappearance of bank credit, has received temporary waivers from lenders allowing it to make the CityCenter payments and exempting it from loan covenants.

The casino operator, controlled by billionaire Kirk Kerkorian, is partnered with the government-owned investment company in the $8.7 billion venture that is slated to begin a phased opening in October.

Dubai World last month filed a lawsuit against its partner, citing mismanagement and cost overruns as well as auditor statements questioning its ability to remain a going concern.

A source with knowledge of the matter told Reuters earlier this week that Dubai World would continue to withhold payments from the project until a comprehensive finance package is obtained.

MGM Chief Executive Jim Murren said in a statement that the company continues to review all options to keep CityCenter fully funded.

“We are continuing to engage in constructive discussions with our senior lenders and the CityCenter lending group and we appreciate the support of the involved parties,” he said.

Activist investor Carl Icahn and other bondholders have proposed that MGM restructure through a bankruptcy filing in which debt would be be exchanged for equity, but only with the participation of Kerkorian.

Shares of MGM rose 40 cents, or 6.8 percent, to close at $6.30 on the New York Stock Exchange, after falling as low as $4.81 in earlier trading. (Reporting by Deena Beasley; Editing by Tim Dobbyn)

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