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MGM Mirage Launches $2.5 Billion Refinance Plan, Floats Bond

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Casino and entertainment giant MGM Mirage was busy on Wednesday with the launching of a multifaceted effort to restructure its short-term debt and reduce the leveraging against its holdings, which include several of Las Vegas’ largest properties. The plans call for the raising of $2.5 billion in investment capital, using an investment by majority shareholder Kirk Kerkorian and a $1.5 billion junk bond with the Bellagio and Mirage casinos as collateral as part of an effort to reduce an overall debt load of approximately $14 billion.

MGM Mirage announced several new initiatives as part of the plan, including the issuance of 81 million new shares of stock and a plan to repurchase $1.05 billion in outstanding debt against the Mandalay Bay resort during 2009. The 91-year-old Kerkorian, whose Tracinda Corp. currently owns 53.8% of MGM Mirage, will purchase 8.1 million shares of the new offering but would still see his overall share of MGM Mirage slide to 43% under the new plan. The additional 81 million shares would swell MGM Mirage’s offerings to roughly 357 outstanding shares.

Initial reactions from Wall Street were negative, with MGM Mirage declining sharply on the day. The stock finished down $3.70 to $8.70 a share, a decline of just under 29.7%. The company has also suffered a lower credit rating recently in the face of its mounting debt. MGM’s bonds surged higher on Wednesday, in contrast to its sliding stock price.

MGM Mirage also continued its restructuring of its financial agreements with Dubai World, with which it shares a major investment in Las Vegas’ ongoing $8.5 billion CityCenter project. Dubai World owns half of the CityCenter project and an additional 10 percent of MGM Mirage’s outstanding stock, prior to today’s announced issuance of new shares. Dubai World, under the terms of the new agreement, received approvals to acquire up to 20 percent more of MGM Mirage’s outstanding shares.

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