As if MGM Mirage didn’t have enough problems, Dubai World, the company’s partner in the CityCenter development, filed suit against MGM last week alleging that statements made in a March 17 SEC filing constitute a breach of contract.

In late March, Dubai World failed to make an expected and required payment ($110 million of a $220 million payment), which would have forced the project into bankruptcy. MGM Mirage, however, negotiated a one-time alteration of the covenants that allowed the Las Vegas casino company to make the full payment.

The Las Vegas Sun reported that the CityCenter partnership had hired a law firm that specializes in bankruptcy, an option that would have shut down the project and thrown more than 8,000 workers off the job.

Last month, Infinity World Development Corp., a subsidiary of Dubai World that actually invested in the development, filed a lawsuit at the Delaware Chancery Court against MGM for allegedly questioning the viability of CityCenter in the SEC filing, according to a statement issued by Infinity.

Dubai World said that because MGM can’t guarantee that it will be able to meet future payments, it had no choice but to file the action.

Responding to the lawsuit, Alan Feldman, senior VP of public affairs, said in a statement: “The lawsuit filed yesterday by a subsidiary of Dubai World is completely without merit. Dubai World is well aware of our written commitment to meet our funding obligations and that MGM Mirage has available cash to satisfy those obligations.”

In the March 17 filing, MGM Mirage admitted its financial troubles and said it had obtained waivers of several debt covenants and announced it had another 60 days, until May 15, to get its financial house in order. But it also gave its partners the right to declare the company in default, which could possibly drive it into Chapter 11 bankruptcy.

MGM Mirage isn’t the only company flirting with bankruptcy right now, with both Harrah’s Entertainment and Station Casinos also struggling under burdensome debt loads after going private a few years ago.

Station Casinos has proposed a prepackaged bankruptcy and is waiting for approval from bondholders. The company wants the prepackaged deal to keep operations running normally and to avoid disruptions in service to customers.

Harrah’s Entertainment, struggling under a debt load in excess of $23 billion, recently said it might not be able to generate enough cash flow to continue operating. The company is hoping to issue $2.8 billion in lower value but higher interest notes that will expire in 2018 in exchange for current notes that mature in the next nine years. Thus far, about 57 percent of the notes the company is seeking have been tendered.

Additionally, private equity firms Apollo Management and TPG Capital are working to buy up as much of the outstanding debt as possible, with Bloomberg News reporting the two companies might own as much as 20 percent of Harrah’s “second-lien” loans.

Herbst Gaming also announced a restructuring agreement on the $847 million in debt it is carrying that calls for splitting the company into a casino business and a slot route.

The casino business would be owned 100 percent by lenders, while the slot route will be owned 90 percent by the Herbst family. The proposal is awaiting approval by the U.S. Bankruptcy Court.

“All operations of the company will continue under current management on a business as usual basis throughout the restructuring process. The proposed restructuring plan allows for continued timely payments to vendors under normal trade terms...without interruption,” the company said in a statement.

By Casino Connection Staff