MGM » Topics » Other Factors Affecting Liquidity

These excerpts taken from the MGM 10-K filed Mar 17, 2009.
Other Factors Affecting Liquidity
 
Amendment to senior credit facility.  In September 2008, we amended our senior credit facility to increase the maximum total leverage ratio (debt to EBITDA, as defined) to 7.5:1.0 beginning with the fiscal quarter ending December 31, 2008, which will remain in effect through December 31, 2009, with step downs thereafter. The amendment modified drawn and undrawn pricing levels as well as revised certain definitions and limitations on secured indebtedness. Our drawn pricing levels over LIBOR remain unchanged when the maximum total leverage ratio is less than 5.0:1. When the maximum total leverage ratio exceeds that level, the drawn pricing levels over LIBOR range from 1.25% to 2.00%.
 
Request to borrow remaining available funds under the senior credit facility.  In February 2009, we submitted a borrowing request for $842 million, the remaining amount of available funds (other than outstanding letters of credit) under our senior credit facility. The borrowing request was fully funded as of February 26, 2009. For further discussion of this event and its impact on our liquidity and financial position, see “Executive Overview — Liquidity and Financial Position.”
 
Long-term debt payable in 2009.  We have $226 million of principal of senior notes due in July 2009 and $820 million of principal of senior notes due in October 2009.
 
Sale of TI.  In December 2008, we entered into a purchase agreement pursuant to which we have agreed to sell TI to Ruffin Acquisition, LLC (“Ruffin Acquisition”) for a purchase price of $775 million. The purchase price is to be paid at closing as follows: $500 million in cash and $275 million in secured notes bearing interest at 10%, with $100 million payable not later than 175 days after closing and $175 million payable not later than 24 months after closing. The notes, to be issued by Ruffin Acquisition, will be secured by the assets of TI and will be senior to any other financing. In March 2009, we entered into an amendment to the purchase agreement which a) extends the maturity of the $175 million note to 36 months, and b) offers Ruffin Acquisition a $20 million discount on the purchase price effected through a reduction in principal of the notes if they are paid in full by April 30, 2009. The transaction is subject to customary closing conditions contained in the purchase agreement, including receipt of all gaming and other regulatory approvals. In addition, the ability of Ruffin Acquisition to obtain financing is not a closing condition. We anticipate that the transaction will be completed by March 31, 2009, and we expect to report a substantial gain on the sale. Under the terms of our 13% senior secured notes, within 360 days of the receipt of the proceeds from the TI sale we must either invest such proceeds in qualifying investments, which includes capital expenditures, or offer to repurchase the senior notes at par.
 
MGM Grand Atlantic City development.  In October 2007, we announced plans for a multi-billion dollar resort complex on our 72-acre site in Atlantic City. Since making that announcement, we have made extensive progress in design and other pre-development activities. However, current economic conditions, including limited access to capital markets for projects of this scale have caused us to reassess timing for this project. Accordingly, we have postponed current development activities.
 
Mashantucket Pequot Tribal Nation.  We have entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Mashantucket, Connecticut. Under the strategic alliance, a new casino resort owned and operated by MPTN located adjacent to the existing Foxwoods casino resort carries the “MGM Grand” brand name. The resort opened in May 2008. We are receiving a brand licensing and consulting fee in connection with this agreement. We have also formed a jointly owned company with MPTN — Unity Gaming, LLC — to acquire or develop future gaming and non-gaming enterprises. Under certain circumstances, we will provide a loan of up to $200 million to finance a portion of MPTN’s investment in joint projects.
 
Kerzner/Istithmar joint venture.  In September 2007, we entered into a definitive agreement with Kerzner International and Istithmar forming a joint venture to develop a multi-billion dollar integrated resort to be located on the southwest corner of Las Vegas Boulevard and Sahara Avenue. In September 2008, we and our partners agreed to defer additional design and pre-construction activities and amended the joint venture agreement accordingly. In the event the joint venture partners agree that the resort will be developed, we will contribute 40 acres of land, valued at $20 million per acre, for fifty percent of the equity in the joint venture. Kerzner International and Istithmar will contribute cash totaling $600 million, of which $200 million will be distributed to us, for the other 50% of the equity.


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Table of Contents

Other
Factors Affecting Liquidity



 



Amendment to senior credit facility.  In
September 2008, we amended our senior credit facility to
increase the maximum total leverage ratio (debt to EBITDA, as
defined) to 7.5:1.0 beginning with the fiscal quarter ending
December 31, 2008, which will remain in effect through
December 31, 2009, with step downs thereafter. The
amendment modified drawn and undrawn pricing levels as well as
revised certain definitions and limitations on secured
indebtedness. Our drawn pricing levels over LIBOR remain
unchanged when the maximum total leverage ratio is less than
5.0:1. When the maximum total leverage ratio exceeds that level,
the drawn pricing levels over LIBOR range from 1.25% to 2.00%.


 



Request to borrow remaining available funds under the senior
credit facility
.  In February 2009, we submitted a
borrowing request for $842 million, the remaining amount of
available funds (other than outstanding letters of credit) under
our senior credit facility. The borrowing request was fully
funded as of February 26, 2009. For further discussion of
this event and its impact on our liquidity and financial
position, see “Executive Overview — Liquidity and
Financial Position.”


 



Long-term debt payable in 2009.  We have
$226 million of principal of senior notes due in July 2009
and $820 million of principal of senior notes due in
October 2009.


 



Sale of TI.  In December 2008, we entered into
a purchase agreement pursuant to which we have agreed to sell TI
to Ruffin Acquisition, LLC (“Ruffin Acquisition”) for
a purchase price of $775 million. The purchase price is to
be paid at closing as follows: $500 million in cash and
$275 million in secured notes bearing interest at 10%, with
$100 million payable not later than 175 days after
closing and $175 million payable not later than
24 months after closing. The notes, to be issued by Ruffin
Acquisition, will be secured by the assets of TI and will be
senior to any other financing. In March 2009, we entered into an
amendment to the purchase agreement which a) extends the
maturity of the $175 million note to 36 months, and
b) offers Ruffin Acquisition a $20 million discount on
the purchase price effected through a reduction in principal of
the notes if they are paid in full by April 30, 2009. The
transaction is subject to customary closing conditions contained
in the purchase agreement, including receipt of all gaming and
other regulatory approvals. In addition, the ability of Ruffin
Acquisition to obtain financing is not a closing condition. We
anticipate that the transaction will be completed by
March 31, 2009, and we expect to report a substantial gain
on the sale. Under the terms of our 13% senior secured
notes, within 360 days of the receipt of the proceeds from
the TI sale we must either invest such proceeds in qualifying
investments, which includes capital expenditures, or offer to
repurchase the senior notes at par.


 



MGM Grand Atlantic City development.  In
October 2007, we announced plans for a multi-billion dollar
resort complex on our
72-acre site
in Atlantic City. Since making that announcement, we have made
extensive progress in design and other pre-development
activities. However, current economic conditions, including
limited access to capital markets for projects of this scale
have caused us to reassess timing for this project. Accordingly,
we have postponed current development activities.


 



Mashantucket Pequot Tribal Nation.  We have
entered into a series of agreements to implement a strategic
alliance with the Mashantucket Pequot Tribal Nation
(“MPTN”), which owns and operates Foxwoods Casino
Resort in Mashantucket, Connecticut. Under the strategic
alliance, a new casino resort owned and operated by MPTN located
adjacent to the existing Foxwoods casino resort carries the
“MGM Grand” brand name. The resort opened in May 2008.
We are receiving a brand licensing and consulting fee in
connection with this agreement. We have also formed a jointly
owned company with MPTN — Unity Gaming,
LLC — to acquire or develop future gaming and
non-gaming enterprises. Under certain circumstances, we will
provide a loan of up to $200 million to finance a portion
of MPTN’s investment in joint projects.


 



Kerzner/Istithmar joint venture.  In September
2007, we entered into a definitive agreement with Kerzner
International and Istithmar forming a joint venture to develop a
multi-billion dollar integrated resort to be located on the
southwest corner of Las Vegas Boulevard and Sahara Avenue. In
September 2008, we and our partners agreed to defer additional
design and pre-construction activities and amended the joint
venture agreement accordingly. In the event the joint venture
partners agree that the resort will be developed, we will
contribute 40 acres of land, valued at $20 million per
acre, for fifty percent of the equity in the joint venture.
Kerzner International and Istithmar will contribute cash
totaling $600 million, of which $200 million will be
distributed to us, for the other 50% of the equity.





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EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 17, 2009
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