Icahn joins cast of MGM Mirage saga...and more North American news



ICAHN JOINS CAST OF MGM MIRAGE SAGA

Speculation surrounding the fate of debt-laden MGM Mirage and its troubled CityCenter megaresort took a new twist late last month amid reports that corporate raider Carl Icahn is now a player.

Icahn and private equity fund Oaktree Capital Management, which owns 42 percent of Las Vegas-based Cannery Casinos, have purchased large amounts of MGM Mirage bonds, according to news reports, and those sources say Icahn may be trying to steer the Strip giant into Chapter 11 reorganization in a bid to gain an ownership stake, possibly through a debt-for-equity swap in league with majority owner, billionaire Kirk Kerkorian.

One such scenario would see bondholders given a choice of equity or cash, the amounts to be determined by a federal bankruptcy judge, or a mix of both.

MGM Mirage, laboring under $13.5 billion of debt in a recession that has severely curtailed consumer spending, is trying to refinance its obligations and complete the $8.7 billion CityCenter. As of last month, lenders had given the company until May 15 to come up with a refinancing plan.

A critical hurdle in CityCenter’s completion may have been scaled, however, according to news reports indicating that MGM Mirage and its disaffected partner, Dubai World, have reached an agreement on financial terms for completing the resort, reputedly the most expensive privately funded construction project in the world.

Dubai World, an arm of the Dubai government, sued MGM Mirage earlier this year in a bid to extricate itself from its 50 percent investment in CityCenter, alleging breach of contract based on its claim that MGM Mirage’s financial troubles cast doubt on its ability to complete construction. Since the suit was filed, MGM Mirage has twice covered Dubai World’s half of current construction costs.

The terms of the agreement, which would require bank approvals, had not been disclosed as of press time; but it is believed Dubai World may be seeking a larger ownership stake in MGM Mirage in addition to financial assurances. It was speculated that these could involve separating CityCenter from a possible MGM Mirage reorganization.

PARTY GAMING SETTLES WITH U.S. GOVERNMENT, AGREES TO PAY $105M.

Party Gaming has finally escaped the United States government - and it got away cheap.

The online poker giant entered into an agreement with the U.S. Attorney’s Office for the Southern District of New York last month that guarantees the company will not be prosecuted for the Web gambling services it provided in the United States prior to the 2006 passage of the U.S. Unlawful Internet Gambling Enforcement Act. In exchange, Party has agreed not to deal to U.S. players and will forfeit to the government $105 million, payable in semi-annual increments through 2012.

The price is light compared to the $300 million Party co-founder Anurag Dikshit has to pay as part of a plea agreement he entered into earlier this year with the U.S. Justice Department. Dikshit also faces up to two years in prison and a $250,000 fine. His sentencing is set for September 30.

The agreement brings to a close a case dating from 1997 - when U.S. officials say Party launched operations in the United States - to October 2006, when UIGEA became law and Party was forced to pull up stakes. The Justice Department claims that up to 85 percent of Party’s revenues at one point were generated in the United States, where Internet gambling is prohibited.

PHILLY MAYOR IS OK WITH SUGARHOUSE PLANS

Sugarhouse, the developer of one of Philadelphia’s two proposed slots casinos, has won Mayor Michael Nutter’s support for their revised design plans.

Lengthy discussions with the city and members of the Fishtown and Northern Liberties communities along the Delaware River where the casino is proposed have resulted in a design that reduces the casino’s size and addresses traffic congestion and waterfront access issues, according to local news reports.

The plan will be reviewed by the state Gaming Control Board then will go back to Philadelphia City Council. If approved, a temporary facility housing 1,700 slot machines could be open by mid-2010, Sugarhouse officials have said. The permanent casino, projected for an opening late in 2011 or early 2012, will contain 3,000 slots.

Caesars Windsor is pushing job cutbacks, and the union is ‘ticked off’.  

Have a heart, Celine

Despite a 19 percent increase in revenue last quarter, Caesars Windsor has eliminated  56 full-time positions, mostly in the food and beverage department, in a shift toward more part-time workers.

“This is all about realigning our staffing requirements based on our new business level,” a spokeswoman told The Windsor Star. “We need to remain flexible so we can schedule staff during the busy times. We have to make sure we’re meeting the needs of our guests in this really competitive market.”

Sixty-seven food and beverage positions now are part-time, compared with eight previously. Full-time positions were reduced from 66 to 10.

CAW Local 444, which represents the workers, is not pleased with the cuts, which entail not only fewer hours but reduced benefits and job security.

Pam Leach, the local’s casino liaison, told the Star she’s “ticked off”.

“We have a collective agreement that says the casino cannot go over 33 percent of part-time employees in any department. So having all these full-time positions being laid off, and all these part-time postings going up, they’re more or less telling us that they’re going to go to the maximum of 33 percent.”

Revenues at Caesars Windsor were C$76 million for the quarter ended December 31, up from $63.8 million in the same period in 2007. Year-to-date revenues were up 4 percent to $228.9 million. The property attributes the increases in large part to its recent expansion and a new headliner-driven entertainment policy designed to exploit its new 5,000-seat Colosseum theater.

“This is a much more expensive facility to run,” the casino’s spokeswoman said in justifying the job cuts. “Celine Dion doesn’t work for free.”

A.C. CLOSES BOOKS ON WORST YEAR EVER

Atlantic City’s 11 casinos suffered a 24.6 decline in gross operating profits in 2008 as the city continues to reel from the twin blows of the economic downturn and increased competition in neighboring states.

A key measure of industry profitability, gross operating profit - calculated as EBITDA plus charges from affiliates and other non-cash charges - fell to $940.9 million from $1.25 billion in 2007. Hotel occupancy dipped from 91.6 percent to 87.4 percent, partly the result of the addition of 2,485 rooms.

Gross profits were down 45.8 percent in the fourth quarter to $131.9 million on a 14.9 percent decline in revenues to $951.6 million.

For the year, after counting non-cash charges, including $890 million in write-downs, the industry lost $1.1 billion.

OHIO CASINO DRIVE MOVES TOWARD A VOTE

Ohio Attorney General Richard Cordray has approved a petition for a constitutional amendment that would bring casinos to Cleveland, Cincinnati, Columbus and Toledo if approved by voters in November.

The next step is for the Ohio Ballot Board to approve the wording of the petition. Once that happens, the backers of the plan, Ohio Jobs and Growth Committee, will need 402,275 registered voters’ signatures by July 1 to qualify the measure for the general election ballot.