MGM Mirage Dumping Assets to Stay Afloat
What a difference a year makes. Only scant months ago, the business model of the giant casino operators was to mortgage themselves silly so as to race their competitors to build the shinies, newest, most elaborate and luxurious, and most important biggest casino resort. Now companies that eagerly devoured the casinos neighboring them on the Strip, creating multi-casino corporations that ran almost all of the Strip, are forced to sell off the casinos they stockpiled to salvage themselves.
MGM Mirage announced Monday it has agreed to sell the Treasure Island Casino and Hotel on the Las Vegas Strip for $775 million. The company, which has been battling financing and liquidity problems, appears to be casting off assets to booster cash supplies. MGM Mirage has been fighting off bad news from a multitude of sources.
Over the past year MGM Mirage stock has dropped from $86.75 a share to $11.47. Quarterly profit declined 67 percent against the same quarter last year. The CityCenter complex on the Strip has had significant trouble acquiring the necessary credit to complete construction, and Macau, the supposed savior of casino companies, has passed its peak.
Kirk Kerkorian used much of his majority ownership stock to back his purchases of Ford Motor, shares which he recently unloaded at a dime on the dollar. Speculation has arisen that Kerkorian's controlling interest in MGM Mirage may be in jeopardy. And the last CEO just retired amid accusations of academic fraud.
Meanwhile, Treasure Island's new owner, Phil Ruffin, has been a model of business acumen. Ruffin sold the New Frontier Casino to the owners of New York's Plaza Hotel for $1.2 billion. They promptly leveled their purchase, planning to erect the Plaza Las Vegas; but financing has become difficult for all projects.
So, Ruffin sold high for an older property, and buys low for a mid-range casino, paying $15 million an acre on the Strip when a few years ago he was paid $35 million an acre. Maybe, instead of dumping assets on Ruffin, MGM Mirage should appoint him CEO.
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