Will MGM Mirage Stay Afloat?

MGM Mirage (MGM) shares slumped at the open on Friday following reports that activist investor Carl Icahn was pressing the distressed gambling giant to restructure its $13.5 billion debt by seeking bankruptcy protection.

Late Thursday, The Wall Street Journal said Icahn and private-equity fund Oaktree Capital Management have been pursuing MGM Mirage to clean up its balance sheet as soon as possible since last month. Citing sources familiar with the matter, the paper said the two investors, who have separately amassed hundreds of millions of dollars in MGM Mirage debt in recent months, stressed bankruptcy as the best option.

Icahn’s strategy endangers the majority stake billionaire investor Kirk Kerkorian owns in MGM. Kerkorian’s 53% stake would amount to nothing if the company files for bankruptcy, giving secured debtholders priority over shareholders.

MGM Mirage, which has been working hard to avoid bankruptcy, has to make a new equity payment on a big Las Vegas project by Friday. Shares of the company were down nearly 13% to $5.15 in morning trade on the New York Stock Exchange.

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