MGM Mirage Aggressively Attacks Financial Malaise
James Murren has wasted no time since inheriting the position of MGM Mirage CEO from retiring Terry Lanni, looking to find bold ways to reposition the company in the face of mounting debts and declining revenue. Murren has sold the Treasure Island casino on the Las Vegas Strip for a much-needed infusion of $775 million in cash, and this week announced changes in the plans for the CityCenter complex that will save the company some $400 million.
By postponing construction of one of the hotels included in CityCenter's design, and canceling the building of two hundred condominiums attached to the project, Murren has put MGM Mirage in a far more palatable position to finish the mammoth $10 billion Strip casino, shopping mall, and resort complex. About $1.2 billion in financing still needs to be attained for completion, and Murren noted he expects credit markets to loosen in the new year sufficiently to fund CityCenter.
Swallowing a bitter pill is something else that Murren would just as soon confront and move past for MGM Mirage, so he has led the casino operator to write down the value of Mandalay Resort Group, the branch controlling Mandalay Bay Casino and Hotel, by over a billion dollars. Mandalay Bay was acquired by MGM Mirage for $7.67 billion, but declines in gambling revenues and hotel purchase prices have led to the asset's losing value.
Murren has promised to reduce debt and bring MGM Mirage through the current recession a leaner, more streamlined company, and he has shown the willingness to make the hard decisions necessary to achieve this goal. After unloading Treasure Island, Murren noted that purchaser Phil Ruffin approached MGM, and stated the company was not shopping its assets. But he also made clear that virtually nothing was untouchable, for the right offer.
Like the other major Vegas operators, MGM Mirage was caught overextended and tied to expensive expansions when the economic crunch hit. But Murren has acted decisively to free up cash, reduce commitments and construction costs, and ditch less profitable assets in order to set the company back on the path to profitability, after the stock's value dropped eighty-four percent last year.
Help Spread the News