MGM puts casino on the block
Las Vegas-based owner of Detroit's largest, most-profitable gaming house seeks to reduce debt.
Nathan Hurst / The Detroit News
DETROIT -- MGM Grand Detroit, the city's largest and most profitable casino, is up for sale.
It's just one property across Las Vegas-based MGM Mirage's multinational empire being pitched to buyers as the debt-ridden company seeks to shore up its balance sheet, two sources familiar with the matter confirmed Sunday.
The specter of a sale of MGM Grand Detroit and other profitable properties like Bellagio on the Vegas Strip comes as MGM Mirage is seeking to erase tens of billions in debt, much of it financing the company's $8.6 billion CityCenter venture in Las Vegas.
MGM Grand Detroit, completed in late 2007 at a cost of $800 million, is by far the city's most successful, commanding 42.5 percent of gaming revenue taken in by all three Detroit gambling halls this year, making it particularly attractive for potential buyers.
In confirming the potential sale of MGM's Detroit property to The Detroit News, the two sources requested anonymity since neither is authorized to speak on the record about possible corporate transactions made by MGM Mirage.
It's unclear how much any of the properties up for sale, including MGM Grand Detroit, could fetch, given the recession and tight credit markets potential buyers would be working in. But the company's sales overtures in a market with few obvious buyers show MGM Mirage's desire to clear debt as revenues are falling, even if that means a possible breakup of its network of 17 casinos throughout the United States.
The company, majority-owned by billionaire Kirk Kerkorian, has seen its debt ratings and stock price plunge in recent months as the gaming giant has faced serious questions about its ability to continue operating under roughly $13.29 billion in debt. The debt was taken on during the real estate boom earlier this decade, as the land housing many of its landmark Las Vegas Strip properties ballooned in value and credit was easy to obtain.
MGM Mirage took on the extra debt to expand its footprint in Las Vegas and with joint-venture partners around the globe.
Its biggest project, CityCenter -- a condominium, hotel and casino complex on the Vegas Strip -- broke ground just as the real estate and credit markets deflated, bringing the company's stability and stock price down.
MGM and its partners have slowed construction on the project and downsized the condominium portion, though industry observers have questioned CityCenter's viability, given the troubles facing the industry in the down economy.
Since hitting a high of $96.40 a share on October 12, 2007, MGM Mirage stock plunged to $3.53 at market close on Friday. News of a potential sale of MGM Grand Detroit reported over the weekend buoyed shares another 2 percent to 3 percent in after-hours trading.
Kerkorian -- no stranger to Detroit with well-known bids for influence at General Motors Corp. and Ford Motor Co. -- has seen his fortunes fall as a result of MGM Mirage's debt issues, from nearly $15 billion at the company's peak in October 2007 to roughly $500 million today.
Experts said a sale of profitable MGM Grand Detroit would make sense for MGM Mirage.
"Revenues aren't likely to increase soon with consumers pulling back," said Bill Thompson, an industry expert and professor at the University of Nevada Las Vegas. A sale of a profitable property would fetch the best price, he said, "and help get some debt off the books."
Thompson said bond and interest payments due this year are weighing heavily on MGM Mirage, just as gaming revenues in MGM Mirage casinos in states such as Nevada and New Jersey continue to slip.
MGM Grand Detroit's profitability is likely to catch potential buyers' attention: The casino is MGM Mirage's fifth-most profitable. The company's signature Bellagio complex in Las Vegas is the most profitable, sources said.
Keeping MGM Grand Detroit profitable hasn't been easy.
In recent months, it has trimmed staff and operating hours at the casino's three upscale restaurants, and shuttered two retail stores and one of two Starbucks coffee shops.
Whether that profitability is enough to coax a deal from other major casino operating companies remains to be seen. Harrah's Entertainment, which operates Caesars Windsor for the Ontario Lottery and Gaming Corp., and Las Vegas Sands Corp. are saddled with debt and may not invest in a market riddled with years-long recession and population losses, said Bill Eadington, an industry observer and professor with the University of Nevada Reno.
"There could be interest from somebody local," Eadington said, "but the credit markets are tight."
MGM Grand Detroit is also facing cross-town competition on the sales market.
Greektown, the city's smallest and least-profitable casino, has been pitching itself to potential buyers in recent weeks as part of its bid to exit Chapter 11 bankruptcy, filed last May.
The casino is pursuing parallel paths out of bankruptcy and hasn't yet chosen which route to take: an outright sale or a reorganization of debt that would keep the Sault Ste. Marie Tribe of Chippewa, the casino's owner, in charge, or a combination of both.
You can reach Nathan Hurst at (313) 222-2293 or [email protected].
Las Vegas-based owner of Detroit's largest, most-profitable gaming house seeks to reduce debt.
Nathan Hurst / The Detroit News
DETROIT -- MGM Grand Detroit, the city's largest and most profitable casino, is up for sale.
It's just one property across Las Vegas-based MGM Mirage's multinational empire being pitched to buyers as the debt-ridden company seeks to shore up its balance sheet, two sources familiar with the matter confirmed Sunday.
The specter of a sale of MGM Grand Detroit and other profitable properties like Bellagio on the Vegas Strip comes as MGM Mirage is seeking to erase tens of billions in debt, much of it financing the company's $8.6 billion CityCenter venture in Las Vegas.
MGM Grand Detroit, completed in late 2007 at a cost of $800 million, is by far the city's most successful, commanding 42.5 percent of gaming revenue taken in by all three Detroit gambling halls this year, making it particularly attractive for potential buyers.
In confirming the potential sale of MGM's Detroit property to The Detroit News, the two sources requested anonymity since neither is authorized to speak on the record about possible corporate transactions made by MGM Mirage.
It's unclear how much any of the properties up for sale, including MGM Grand Detroit, could fetch, given the recession and tight credit markets potential buyers would be working in. But the company's sales overtures in a market with few obvious buyers show MGM Mirage's desire to clear debt as revenues are falling, even if that means a possible breakup of its network of 17 casinos throughout the United States.
The company, majority-owned by billionaire Kirk Kerkorian, has seen its debt ratings and stock price plunge in recent months as the gaming giant has faced serious questions about its ability to continue operating under roughly $13.29 billion in debt. The debt was taken on during the real estate boom earlier this decade, as the land housing many of its landmark Las Vegas Strip properties ballooned in value and credit was easy to obtain.
MGM Mirage took on the extra debt to expand its footprint in Las Vegas and with joint-venture partners around the globe.
Its biggest project, CityCenter -- a condominium, hotel and casino complex on the Vegas Strip -- broke ground just as the real estate and credit markets deflated, bringing the company's stability and stock price down.
MGM and its partners have slowed construction on the project and downsized the condominium portion, though industry observers have questioned CityCenter's viability, given the troubles facing the industry in the down economy.
Since hitting a high of $96.40 a share on October 12, 2007, MGM Mirage stock plunged to $3.53 at market close on Friday. News of a potential sale of MGM Grand Detroit reported over the weekend buoyed shares another 2 percent to 3 percent in after-hours trading.
Kerkorian -- no stranger to Detroit with well-known bids for influence at General Motors Corp. and Ford Motor Co. -- has seen his fortunes fall as a result of MGM Mirage's debt issues, from nearly $15 billion at the company's peak in October 2007 to roughly $500 million today.
Experts said a sale of profitable MGM Grand Detroit would make sense for MGM Mirage.
"Revenues aren't likely to increase soon with consumers pulling back," said Bill Thompson, an industry expert and professor at the University of Nevada Las Vegas. A sale of a profitable property would fetch the best price, he said, "and help get some debt off the books."
Thompson said bond and interest payments due this year are weighing heavily on MGM Mirage, just as gaming revenues in MGM Mirage casinos in states such as Nevada and New Jersey continue to slip.
MGM Grand Detroit's profitability is likely to catch potential buyers' attention: The casino is MGM Mirage's fifth-most profitable. The company's signature Bellagio complex in Las Vegas is the most profitable, sources said.
Keeping MGM Grand Detroit profitable hasn't been easy.
In recent months, it has trimmed staff and operating hours at the casino's three upscale restaurants, and shuttered two retail stores and one of two Starbucks coffee shops.
Whether that profitability is enough to coax a deal from other major casino operating companies remains to be seen. Harrah's Entertainment, which operates Caesars Windsor for the Ontario Lottery and Gaming Corp., and Las Vegas Sands Corp. are saddled with debt and may not invest in a market riddled with years-long recession and population losses, said Bill Eadington, an industry observer and professor with the University of Nevada Reno.
"There could be interest from somebody local," Eadington said, "but the credit markets are tight."
MGM Grand Detroit is also facing cross-town competition on the sales market.
Greektown, the city's smallest and least-profitable casino, has been pitching itself to potential buyers in recent weeks as part of its bid to exit Chapter 11 bankruptcy, filed last May.
The casino is pursuing parallel paths out of bankruptcy and hasn't yet chosen which route to take: an outright sale or a reorganization of debt that would keep the Sault Ste. Marie Tribe of Chippewa, the casino's owner, in charge, or a combination of both.
You can reach Nathan Hurst at (313) 222-2293 or [email protected].