March 23, 2009 - Dubai World - MGM CityCenter, Las Vegas NV

Dubai World files lawsuit against MGM

"Ensuring completion of the project on acceptable terms is why Dubai World is taking the actions it is announcing."

Dubai World Subsidiary Infinity World Files Lawsuit Against MGM to Protect Its Rights and the Viability of the CityCenter Joint Venture

A subsidiary of Dubai World has filed a lawsuit in the United States against the US firm MGM, its partner in a Las Vegas development project, the investment company announced on Monday.

Infinity World filed the suit "to protect its rights and the viability of the CityCenter joint venture" because MGM had violated the terms of their contract by approaching the Securities and Exchange Commission (SEC), it said.

The lawsuit filed in Delaware "alleges breach of contract by MGM based upon MGM's SEC filing that there is 'substantial doubt' about its ability 'to continue as a going concern'," Dubai World said.

"Infinity World requests declaratory relief from obligations under the joint venture agreement as a result of MGM's breach," it said. The lawsuit is "intended to ensure CityCenter's long-term viability and financial strength."

The SEC was approached over difficulties in financing the project, with MGM warning that "there is substantial doubt about our ability to continue as a going concern," according to the holding firm Dubai World.

In its lawsuit, "Infinity World asked for a declaratory judgement and other measures that would relieve Infinity World of its obligations under the joint venture agreement resulting from MGM's breach," Dubai World said.

"The current path of the project is simply unsustainable given our partner's financial troubles."

Dubai World charged that MGM had mismanaged the project, "resulting in costs significantly over budget despite downsizing certain of the facilities."

In August 2007, MGM had provided an estimate of 7.488 billion dollars to complete CityCenter. But it had since increased the estimate to 8.8 billion dollars, of which MGM had raised only 1.8 billion dollars.

Infinity World has to date contributed about 4.3 billion dollars, it said.

It said CityCenter was a "mixed-use luxury residential, resort and retail complex being developed by MGM" between the Bellagio and Monte Carlo resorts on the Las Vegas Strip.

The project, scheduled to open in late 2009, is owned by CityCenter Holdings LLC, a joint venture equally owned by MGM and Infinity World.

Dubai World said it "continues to believe that the CityCenter project has enormous value and will eventually reap tremendous benefits for the Las Vegas community and its investors."

"Ensuring completion of the project on acceptable terms is why Dubai World is taking the actions it is announcing."

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Original Story - AFP

MGM Reply

MGM Mirage, the casino company controlled by Kirk Kerkorian and owner of the MGM Grand Detroit, said the lawsuit filed by a unit of Dubai World Monday is "completely without merit."

MGM Mirage is "ready, willing and able" to fund its share of costs to complete their CityCenter joint venture on the Las Vegas Strip, including a required payment this week, the company said Tuesday in an e-mailed statement. "MGM Mirage has available cash to satisfy those obligations."

Update March 26, 2009

CityCenter Las Vegas Development Might File for Bankruptcy

CityCenter, the troubled residential and casino development in Las Vegas, has hired a law firm, Dewey & LeBoeuf, to prepare for a potential bankruptcy filing, people briefed on the matter said on Thursday.

Its developers, MGM Mirage and Dubai World, will likely fail to make a $220 million debt payment due Friday, these people said. The sprawling and unfinished $8.6 billion project may file for bankruptcy within days, though an agreement could be reached before then.

Talks among the developers, MGM Mirage and Dubai World, and their lenders are already under way.

Last week, Dubai World filed suit against the beleaguered casino operator MGM Mirage, claiming that its finances had imperiled CityCenter’s fate. The project, which is the biggest privately financed construction one in United States history, was meant to be a crowning achievement for MGM Mirage. A 67-acre site with hotel-condominiums, a casino and a 500,000-square-foot shopping center was planned.

MGM Mirage, which is controlled by the billionaire investor Kirk Kerkorian, reported a $1.15 billion fourth-quarter loss this month. The company, burdened with more than $13 billion in debt, has hired the investment bank Evercore Partners and the law firm Weil, Gotshal & Manges as advisers.

It has already agreed to sell its Treasure Island casino for $775 million.

Many of the big Las Vegas casino operators, including MGM Mirage, the Las Vegas Sands and Harrah’s Entertainment, have been hit hard by the drop in business caused by the recession. Now they are hard pressed to meet their debt obligations after years of rapid expansion when times were flush.

Update Story - New York Times

Update 4/30/09

Big Project in Las Vegas Secures Pact to Survive

City Center, the $8 billion-plus resort under construction in Las Vegas, won a crucial victory Wednesday when its lenders and owners struck a deal that guarantees the project will be finished.

The agreement comes just weeks after the project, owned jointly by casino giant MGM Mirage and Persian Gulf investment arm Dubai World, was on the verge of filing for bankruptcy protection and embroiled in a lawsuit. Dubai World filed a complaint against MGM Mirage alleging cost overruns and mismanagement after auditors in March warned about MGM Mirage's ability to continue as a "going concern."

Dubai World said Wednesday it is withdrawing a suit against MGM Mirage, and will resume paying its share of monthly construction costs. It will also repay MGM Mirage $135 million the casino company paid to fund City Center after Dubai World skipped two of its payments.

News of the deal should come as a relief to southern Nevada, which has seen its unemployment rate soar as the casino industry has suffered in a global recession. About 8,000 construction workers are employed at City Center. Once the project opens at the end of this year, it is expected to employ another 12,000 hotel and casino workers.

The new agreement guarantees the completion of City Center even in the event of an MGM Mirage bankruptcy, something that deeply concerned Dubai World, which has invested $4.3 billion in the project. The project's total cost is now estimated at $8.5 billion.

The deal struck Wednesday eases some financial pressure on MGM Mirage, controlled by billionaire investor Kirk Kerkorian. The lenders, a consortium of nine banks led by Bank of America Corp., agreed to immediately release a $1.8 billion loan to both MGM Mirage and Dubai World, which the partners used to make a $200 million construction payment Wednesday.

"It's the best possible outcome I feel like the joint venture could have come to," said MGM Mirage Chief Executive Jim Murren in an interview Wednesday. Mr. Murren said he was pleased with the terms his company was able to negotiate with its lenders.

The deal also comes at a price for MGM Mirage: The casino company agreed to pay entirely for any City Center cost overruns on its own and agreed to repay its senior lenders $100 million in return for waivers necessary to activate the City Center deal. Both partners agreed to a higher interest rate on a $1.8 billion City Center loan.