Dubai World, MGM late in securing US$3.5 billion for Las Vegas project

NTERNATIONAL. MGM Mirage and Dubai World are late in raising as much as US$3.5 billion for their US$11.2 billion CityCenter project in Las Vegas because banks are wary of making new loans.

Under the terms of the original agreement Dubai World acquired a 50% stake in CityCenter, a high-end 76-acre development of hotels, condos and retail set for a 2009 opening.

Deutsche Bank AG and Credit Suisse Group, the Zurich-based bank that advised Dubai World last year when it invested US$5.1 billion in MGM, are among the holdouts, bankers with knowledge of the matter said.

Funding was supposed to be completed by the end of June, MGM Chief Financial Officer Daniel D'Arrigo told analysts in May. President James Murren said Frankfurt-based Deutsche Bank has been part of every MGM loan since 1998.

"No company in America is having an easy time doing bank deals right now," Murren said in an interview. "There will be some banks that can't commit because they have a lot of exposure in the area or don't like the pricing."

Building the 76-acre 'city-within-a-city,' designed by architects, including Norman Foster and Daniel Liebeskind, is costing Las Vegas-based MGM and Dubai about US$100 million each per month, D'Arrigo said in May.

MGM and Dubai World will raise at least US$3 billion and may increase that to US$3.5 billion to fund construction, MGM's Murren said on 14 July.

CityCenter, located between the Bellagio and Monte Carlo casinos, is different from its highly leveraged competitors, Murren said. The project, which is scheduled to open in late 2009, relies mainly on equity capital as opposed to debt. Dubai and MGM can increase their contributions to CityCenter if financing costs climb, he said.

Increasing the equity contribution would leave less capital for future projects and could lower MGM's credit rating, said Peggy Holloway, a senior credit officer at Moody's Investors Service in New York. Moody's put MGM's debt under review for downgrade earlier this month, reflecting the need to complete the CityCenter financing and the "challenging operating environment in Las Vegas." MGM is rated 'Ba2', the second-highest junk rating.

"There was some belief that Las Vegas was recession-resistant," Holloway said. "Clearly, that hasn't been the case."