Slowdown puts casino giant in the red
Posted by Bev Freeman on 07 Aug 2009 at 09:08
Casino giant MGM Mirage has ended up in the red in the second quarter of the year as the slowdown in Las Vegas continues.
However, shares in the world's biggest casino operator improved as company revenues ended up being better than expected.
The completion of funding for its nine billion dollar CityCenter project help prop the company up during the quarter and this was combined with the restructuring of debts, which further provided security.
MGM Mirage also recently sold a stake to Genting, the Malaysian gaming group.
MGM Grand, the Mirage, and the Bellagio, all in Las Vegas, are all owned by MGM and have found the last few months difficult, according to the Financial Times.
The paper added the company countered this by improving its financial position during the quarter by issuing $1.5 billion in new debt and selling $1.15 billion of new shares.
According to the Financial Times the company chief executive, Jim Murren, said the quarter had been "monumental" and the restructuring had "meaningfully improved our financial position".
Although the finance is now a lot more secure in the short-term at least, the company is still battling a slumping gaming market which has hit its interests from Las Vegas to Macau.
Although visitors are still pouring into many venues they are spending less and, significantly, the revenue per available room, a key point in the resort casino business, has dropped.
There has even been a falling convention interest, which has helped to drive down occupancy rates and also prices for rooms. Mr Murren has also said there will be signs of improvement as far as convention bookings goes, but food and beverage sales are down.
Las Vegas has been swamped with new hotel projects which has added to the competition and overrun the market.
Quoted by the Financial Times, Mr Murren defended the CityCenter project, built by MGM and featuring hotels, condos, shops and a casino.
He said: "We believe CityCenter will invigorate the Las Vegas market and be a key component of the future growth of MGM Mirage."
The year so far has also seen MGM Mirage face difficulties in connection with its joint venture in Macau with Pansy Ho, daughter of gambling boss Stanley Ho.
New Jersey regulators have reopened the review of the firm's gaming licence in Atlantic City after it told the company earlier this year to disengage from the joint venture with Miss Ho.
The New Jersey division of gaming enforcement described Ho as "unsuitable" as a partner.
If the company cannot win approval for the partnership its licence for the Borgatta casino in Atlantic City could be threatened.
According to the Financial Times a spokesman for the company said the re-opening of the review was "a procedural move" and was expected.
MGM Mirage recorded a loss of $216.6 million compared to a net profit of $113.1 million in the same period last year.
Revenues on the other hand were better than expected even though they fell from $1.9 billion to $1.5 billion. Losses per share stood at $0.60 with the company earning $0.41 per share to the same period in 2008.
