MGM Mirage has officially put the company’s resorts in Detroit and Biloxi on the market.
According to analysts, the casino operator hired Wall Street investment firm Morgan Stanley to evaluate its sales offers for MGM Grand Detroit and View Ridge. The company could sell for between $1.5 billion and $2 billion. 에볼루션 바카라사이트
Once the sale is complete, MGM Mirage will help address the company’s liquidity challenges surrounding about $13.5 billion in long-term debt emerging on the casino operator’s balance sheet.
One game analyst believes MGM Mirage is being asked by lenders to sell two resorts.
“May 15 is coming, and banks may be pushing for it,” Joe Pat, a game analyst at fund manager T. Rowe Price, said on Monday. “These two assets are relatively new and stable. They are also viewed as non-core assets and have clearly attracted attention.”
Pat thought the casino could sell for about seven times its cash flow, multiple companies similar to the one MGM Mirage used to sell Treasure Island to Phil Ruffin last month for $775 million. He said several publicly traded gaming companies, such as Penn National, as well as many private equity groups and retail investors may be interested.
Bill Lerner, a game analyst at Deutsche Bank, has a similar view on the potential deal. He estimated that MGM Grand Detroit would generate $134 million in cash flow in 2009, and ViewLibge would have $120 million in cash flow. He said both properties have shown resilience in tough economies. Selling off the resort makes sense for MGM Mirage’s near future.
However, KDP Investment analyst Barbara Cappaert questioned whether proceeds from sales would be enough to cover MGM Mirage’s obligations. She said the loss of cash flow at both casinos would hurt MGM Mirage.
“While we will accept the positive market sentiment of the asset sale move, we do not believe the company will emerge from the crisis and expect more moves to take place,” Capaert wrote in a research note.
Investors have reacted positively to Morgan Stanley’s hiring.
Shares of the company’s stock rose more than 40% as it opened trading on the New York Stock Exchange before regaining ground. MGM Mirage closed at $5.53 on Friday, up 88 cents, or 18.92%, from its close. More than 55.5 million shares of MGM Mirage traded on Monday, nine times its average daily volume.
MGM Mirage’s closing price was its highest since Feb. 13, but fell well short of its closing price of $61.97 a year ago.
A source at MGM Mirage said the company would evaluate offers for the two casinos, investigate possible buyers and ask for further offers for the two resorts.
MGM Grand Detroit and View Ridge are two of the company’s crown jewels on the outskirts of Streep, where MGM Mirage operates nine resorts and is building an $8.7 billion city center.
MGM Mirage opened MGM Grand Detroit in October 2007 for $800 million after operating a temporary casino facility for several years. In Biloxi, the largest casino and tallest building in Mississippi, View Ridge, was built by Steve Wynn and sold to MGM Mirage in 2000 as part of a $6.4 billion purchase by Mirage Resort.
The View Ridge was closed for a year from August 2005 to August 2006 due to property damage sustained during Hurricane Katrina. MGM Mirage spent $500 million to refurbish its hotel casino.
Last month, MGM Mirage Chairman and CEO Jim Merren said the company hired an outside restructuring adviser to evaluate the offer it received for some of its nine strip casinos.
MGM Mirage faces two separate financial challenges: MGM needs to restructure the company’s $13.5 billion long-term debt and finance the $8.7 billion city center development owned by the company through a 50-50 partnership with Dubai World.
Analysts do not believe the proceeds from the sale of both casinos will be used to fund CityCenter.