MGM Mirage and Dubai World last month announced an agreement with lenders that immediately freed up the .8 billion needed to finish construction of CityCenter.
“We are pleased that MGM Mirage and Dubai World, with the strong support of CityCenter’s lenders, have agreed to a comprehensive plan for the financing and completion of CityCenter,” the companies said in a joint press release. “CityCenter is now fully funded and on track to open in December 2009.”
The agreement allows MGM Mirage and Dubai World to fund the remaining equity contributions to the project with letters of credit. It also will result in Dubai World dropping its lawsuit against MGM Mirage.
The deal requires MGM Mirage to assume full responsibility to pay for any cost overruns. The company had to pay lenders $100 million in return for waivers necessary to finalize the deal. It also establishes a higher interest rate-two percentage points higher than the original agreement-on the $1.8 billion loan.
“This is the best possible outcome that we could have envisioned,” MGM Mirage CEO Jim Murren told Bloomberg News. He said the announcement helps protect the company from having to unload any of its properties to fund the project. “If anyone thought they were going to get a bargain-basement special deal, today’s announcement will disappoint them.”
Casino mogul Steve Wynn had expressed interested in buying some MGM properties if he thought the price was right.
In addition to dropping its lawsuit against MGM Mirage, Dubai World has agreed to repay the company $135 million for equity payments made on its behalf over the past month. MGM Mirage made payments of $70 million and $35 million on behalf of its investment partner while the two sides were dealing with the lawsuit. Those payments were necessary to keep construction moving forward on the project.
Dubai World was concerned that MGM Mirage might have to file for bankruptcy, and that such a filing would trip default covenants in its CityCenter financing.
“This agreement provides a stable financial framework,” said Chris O’Donnell, Dubai World’s director for the CityCenter venture.
Key terms of the CityCenter agreement:
• MGM Mirage is responsible for completion costs should
condominium sale proceeds be less than $243 million or should completion costs exceed $8.5 billion
• MGM Mirage’s obligations as they pertain to cost overruns are supported by Circus Circus and adjacent land holdings
• Dubai World is required to fully fund its originally promised contributions but is relieved of all completion guarantees
• The CityCenter credit facility was amended to fully mature on June 30, 2012
• Covenants have been relaxed to allow more flexibility for the first 18 months of operation