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Sat 18 Apr 2009 08:17 PM

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MGM Mirage soap opera continues

MGM Mirage and Dubai World back away from earlier report of Las Vegas CityCenter project agreement.

Hours after making a $70 million payment to keep the CityCenter Las Vegas project going, word surfaced that MGM Mirage and joint venture partner, Dubai World, had reached an agreement to complete the $8.7 billion Strip project.

However, representatives of both companies have since backed away from saying a deal is complete, according to newspaper the Las Vegas Revue-Journal.

"We are having productive conversations with our partners and our lenders," MGM Mirage spokesman Gordon Absher was reported by the newspaper as saying.

The drama played out a day after it was reported that corporate raider Carl Icahn and private equity firm Oaktree Capital management were buying up millions of dollars of MGM Mirage bonds in an effort to force the casino operator into a bankruptcy filing to restructure the company.

MGM Mirage is facing a May 15 deadline to come up with a restructuring plan for its $13.5 billion in long-term corporate debt.

In a volatile day for MGM’s stock on Friday, news of the Ichan move saw the casinos operator open 18 percent down before the reported Dubai World agreement sent the stock price up 11 percent. The casinos operator finished the day up 6.78 percent

MGM Mirage's latest equity payment on CityCenter included covering the $35 million portion of the costs owed by Dubai World – the Dubai Government’s investment arm - which owns 50 percent of the project.

It was the second time CityCenter's lenders gave MGM Mirage a waiver to cover Dubai World's share. In March, MGM Mirage made a $200 million equity payment, including the $100 million Dubai World was supposed to fund.

Another payment for CityCenter is due at the end of April.

In a statement carried by the newspaper, MGM Mirage Chairman and CEO Jim Murren said the company is committed to completing the $8.7 billion Strip development.

"MGM Mirage is determined to make CityCenter a success and we continue to review with our partners all options to keep CityCenter fully funded," Murren said.

"We are continuing to engage in constructive discussions with our senior lenders and the CityCenter lending group and we appreciate the support of the involved parties."

A Dubai World spokesman said the company "welcomes the further confirmation of MGM's commitment to the CityCenter project signaled by its funding of the payment due today (Friday).

''Meanwhile, we continue to work closely with MGM and lenders to find a solution to ensure CityCenter is completed, which is to the benefit of everyone."

However, the emergence of Icahn is another factor to consider, if the assumption that he is pushing for the project to declare bankruptcy, does prove correct.

Icahn and Los Angeles-based Oaktree have separately bought large amounts of MGM Mirage's corporate bonds in recent weeks, according to sources. One media report placed Icahn's purchase at $500 million. It is unclear how much of MGM Mirage's debt Oaktree has purchased.

A bankruptcy would likely wipe out the value of MGM Mirage's stock and leave bondholders, like Icahn, first in line to collect. However, analysts don't believe Icahn has sufficient leverage to force MGM Mirage into bankruptcy.

Moreover, the banks, which hold $7 billion of unsecured debt and would find themselves on a par with bondholders in the event of a bankruptcy filing, still hold most of the trump cards.

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