Is MGM Mirage Still Worth A Gamble?

After MGM Mirage (MGM) gained some breathing space by amending its senior credit facility, the casino giant said it would raise $2.5 billion through stock and bond offerings in order to pay down a chunk of its debt obligations.

The company, which is battling the biggest slowdown in the history of gambling in Las Vegas, said it would privately place $1.5 billion senior secured notes in the junk bond market and offer 81.0 million common shares for gross proceeds of about $1 billion.

The modifications made with its creditors will allow MGM to permanently waive potential defaults from the term “going concern” in its financial statements for fiscal years 2008 and 2009. The company was earlier handed a deadline of June 30 to formulate a restructuring plan that would help it stay afloat in the ongoing crisis.

The sale of the two-part senior secured bonds maturing in 2014 and 2017 is expected to help restructure MGM’s debt load of more than $14 billion and provide some liquidity. The move from Kirk Kerkorian’s dream project comes at a time when investors seeking high returns are showing their willingness to buy riskier bonds from lower-rated firms. All three major agencies have downgraded MGM’s credit ratings repeatedly in the recent past due to its mounting debt.

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