October 12, 2010 / 9:31 PM / 9 years ago

UPDATE 3-Tracinda to cut stake in MGM Resorts

* MGM estimates third-quarter loss of 72 cts/shr

* Received $250 mln offer for 50 pct stake in Borgata

* MGM to sell 40.9 mln shares

* Tracinda cutting stake to 30 pct from 37 pct

* Shares fall 6.8 percent (Adds Tracinda comment, Las Vegas details)

By Deena Beasley

LOS ANGELES, Oct 12 (Reuters) - MGM Resorts International (MGM.N) said on Tuesday that business at its Las Vegas casino/hotels remained soft in the third quarter and added that it will issue new shares at the same time its largest stockholder pares its stake in the company.

The news sent shares of MGM down nearly 7 percent.

MGM, which has vowed to cut its debt load, said it will offer 40.9 million new shares of its stock — representing about $556 million of new equity at Tuesday’s stock close.

Its largest shareholder, Tracinda Corp, will sell 27.8 million of the shares it holds.

Tracinda, the investment vehicle of billionaire Kirk Kerkorian, currently owns 37 percent of MGM and the share sale will cut its stake to around 30 percent.

“It is surprising that Tracinda is selling a bunch of stock,” said Jefferies and Co analyst David Katz. “It could be for any of a number of different reasons, of course, but none of them are positive.”

Tracinda, which said a year ago that it was considering options for its MGM holdings, said in a statement that it is not seeking strategic alternatives for its investment in MGM.

Despite its heavy debt load — $12.9 billion at the end of September — MGM has been able to maneuver through the recent financial crisis, but it has been seeking to raise cash with billions in debt coming due over the next few years.

The company, which operates 10 casino resorts on the Las Vegas Strip, estimated a loss of about 72 cents a share for the third quarter on revenue of $1.56 million.

After stripping out one-time items, the estimate was a loss of 22 cents a share, which was slightly better than the 24-cent-a-share loss on revenue of $1.54 billion expected by Wall Street analysts, according to Thomson Reuters I/B/E/S.

The company’s shares, which traded below $2 in March of last year, were quoted at $12.69 after-hours on Tuesday after closing at $13.61 on the New York Stock Exchange.

The shares had rocketed 16 percent on Friday after Nevada regulators said Las Vegas Strip casinos won 21 percent more money from gamblers in August than they did a year earlier.

MGM said its Las Vegas Strip revenue per available room — key measure of hotel operations — fell 2 percent from a year earlier to $97 in the third quarter.

Third-quarter casino revenue fell about 9 percent from the same period in 2009, with slot revenue down 3 percent and table game volume down 7 percent. Baccarat volume, which rose nearly 50 percent Strip-wide in August, was down 6 percent for the quarter, MGM said.

The company said it recorded a $182 million impairment charge related to CityCenter — its multi-tower Las Vegas Strip joint venture with Dubai World [DBWLD.UL].

MGM also said it has received an offer for its 50 percent stake in the Borgata casino hotel in Atlantic City, New Jersey. It valued the offer at just over $250 million.

After adding back in proceeds from a recent bond offering and land sale, Katz said the price was “in the ballpark” of his $400 million estimate.

But the offer was less than MGM had valued the property and its wrote down its Borgata investment by about $128 million.

MGM said in January that it planned to divest its Borgata stake after New Jersey regulators objected to the suitability of Pansy Ho, the company’s partner in a separate venture in China’s Macau.

MGM’s Macau joint venture filed last month for an anticipated initial public offering in Hong Kong.

Its partner in the Atlantic City venture, Boyd Gaming Corp (BYD.N), now has the option to decide whether to exercise its right of first refusal to the property. (Reporting by Deena Beasley; Editing by Bernard Orr, Ken Li and Steve Orlofsky)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below