M&A

MGM Mirage Bids Farewell, Treasure Island

Kerkorian-controlled hotel-resort company, in liquidity campaign, will get $775m in cash and notes from Ruffin Cos.
Stephen TaubDecember 15, 2008

MGM Mirage, in the midst of a campaign to increase liquidity, agreed to sell its Treasure Island Hotel & Casino in Las Vegas for $775 million in cash and notes to real estate investor Phil Ruffin.

Ruffin is paying $500 million in cash, with $275 million in secured notes with an interest rate of 10 percent. Under the deal, $100 million is payable no later than 175 days after closing and $175 million payable not later than 24 months after closing. The notes, to be issued by Ruffin Acquisition LLC, will be secured by the assets of Treasure Island and will be senior to any other financing.

The deal is expected to close by the end of the second quarter of 2009.

MGM Mirage, majority-owned by Kirk Kerkorian, said it expects to report a substantial gain on the sale of Treasure Island, acquired as part of the merger between MGM Grand Inc. and Mirage Resorts in May 2000.

The hotel-casino, with 2,885 guest rooms and suites, is located on the Las Vegas Strip. It has about 90,000 square feet of gaming space.

Kerkorian has taken a financial beating on MGM Mirage. Back in October, Tracinda, Kerkorian’s holding company, pledged an additional 50 million shares of MGM Mirage stock as collateral to backstop a $600 million credit line being used to buy a stake in Ford Motor Co., Bloomberg News reported at the time. Tracinda holds nearly 149 million shares of MGM Mirage, or slightly less than 54 percent of the total shares, according to a regulatory filing.

Some analysts expressed surprise that MGM Mirage would sell core casino properties, however, and at least one suggested that another casino sale, possibly of the Mirage, could follow.

MGM Mirage stock was up more than 12 percent Monday on news of the casino sale.

MGM Mirage announced on Nov. 18 that its board elected James J. Murren as chairman and CEO, effective Dec. 1, 2008. Murren, its former CFO, replaced J. Terrence Lanni, who unexpectedly announced hits retirement after the Wall Street Journal raised questions about claims that were made about an MBA degree in Lanni’s resume.

On Oct. 30 MGM Mirage sold about $700 million in five-year notes, one of the only junk bond issues to come to market in the past few months, according to Reuters.

Ruffin Cos. is involved in real estate, lodging, manufacturing, energy, and retail enterprises. Its Casino and Gaming Group owns the New Frontier Casino in Las Vegas and Wichita Greyhound Park.