MGM MIRAGE reports dip in quarterly revenue
MGM MIRAGE announced its financial results for the first quarter of 2009. The company reported first quarter diluted earnings per share (EPS) of $0.38 compared to $0.40 per share in the prior year first quarter. The current year results include a gain of $0.44, net of tax, related to the sale of the Treasure Island hotel and casino.
Net revenue decreased 20% to $1.5 billion in the first quarter of 2009. Revenues were negatively impacted by increased convention cancellations – particularly in January and February and at the Company's Las Vegas Strip resorts – and a continued decline in discretionary spending due to the weakened economy. Occupancy at the company's Las Vegas Strip resorts was unusually low in January, improved in February, and returned to a normalized level of approximately 95% in March. The convention cancellations forced the company to shift hotel business to the leisure segment at lower room rates. As a result of these factors, Las Vegas Strip REVPAR decreased by 34%, to $102 for the first quarter of 2009 compared to $154 in the first quarter of 2008.
Total casino revenue declined 16%, with slots revenue down 12% for the quarter. The company's table games volume, excluding baccarat, was down 20% in the quarter, but the high-end of the gaming segment was more resilient, with baccarat volume only down 1% in the 2009 quarter. The overall table games hold percentage was slightly lower in 2009 than the prior year quarter and near the top end of the Company's normal 18% to 22% range in both periods.
The earning report comes days after the company announced that it has entered into an amendment to its senior credit facility, including a waiver through June 30, 2009, of the requirement that the company comply with the senior credit facility's financial covenants.
Under the terms of the amendment and waiver, the company will be able to fulfill its remaining equity contributions to CityCenter through the issuance of an irrevocable letter of credit in the amount of $224 million. The company is also permitted to enter into revised completion guarantees related to CityCenter.
Under the terms of the amendment, the company repaid $100 million under the senior revolving credit facility, which amount is not available for re-borrowing without the consent of the requisite lenders. In addition, the company has agreed to grant the lenders security interests in the assets of Gold Strike Tunica and certain undeveloped land on the Las Vegas Strip, subject to requisite gaming and other approvals, to secure debt under the facility in an amount up to $300 million. MGM Grand Detroit, which is a co-borrower under the senior credit facility, has agreed to grant the lenders a security interest in its assets to secure its borrowings under the facility, subject to gaming and other approvals.
The company said it intends to work with its lenders to obtain additional waivers or amendments prior to June 30, 2009 to address future noncompliance with the senior credit facility; however, the company can provide no assurance that it will be able to secure such waivers or amendments. If additional waivers or amendments are not obtained, following expiration of the waiver on June 30, 2009, the company will be subject to an event of default related to any noncompliance with financial covenants under the senior credit facility. Under the terms of the senior credit facility, noncompliance with financial covenants is an event of default, allowing the lenders (with a vote of lenders holding more than 50% of the borrowings outstanding under the senior credit facility) to exercise any or all of their remedies, including demanding immediate repayment of all outstanding borrowings under the senior credit facility. In addition, there are provisions in the indentures governing the company's senior and senior subordinated notes under which a) the event of default under the senior credit facility, or b) the exercise of remedies under an event of default under the senior credit facility, would cause an event of default under the relevant senior and senior subordinated notes, which would also allow holders of the senior and senior subordinated notes to demand immediate repayment and decline to release subsidiary guarantees. If the lenders exercise any or all such rights, the company may determine to seek relief through a filing under the U.S. Bankruptcy Code.