Partner sues MGM Mirage over CityCenter
The Dubai developer building an $8.6-billion complex on the Las Vegas Strip with casino company MGM Mirage Inc. is suing MGM Mirage because it’s worried about the project’s viability.
Dubai World subsidiary Infinity World claims in a lawsuit filed Monday in Delaware Chancery Court that MGM Mirage’s statements about its financial condition put the project at risk.
Dubai World’s general counsel, George Dalton, in particular cited concerns about a statement in MGM Mirage’s annual report warning it could default on its loans for CityCenter -- which could force MGM Mirage or the joint venture to seek bankruptcy protection.
Struggling under more than $13 billion in debt, MGM Mirage won a waiver from the terms of some of its debt last week that would give it until May 15 to get its finances in shape.
Chief Executive Jim Murren has said CityCenter, which the company touts as the most expensive private commercial development in U.S. history, is MGM Mirage’s top priority.
Infinity World is asking the court to award it unspecified damages and relieve it of its obligations under the venture, but Dalton said Infinity wanted to see CityCenter through.
“What we are attempting to do is complete this project,” Dalton said.
Dalton said the state-owned company “had no choice” but to file suit.
Dubai World owns a 50% stake in the casino, hotel, retail and residential CityCenter development and controls about 9.5% of MGM Mirage shares.
“We’re not saying MGM won’t be involved,” Dalton added. “We’re anxious to work with them, but we need to see them come out of their financial problems.”
Adam Cohen, founder of independent credit research firm Covenant Review, said Dubai World and Infinity might have sued to stabilize their interest in the project.
“If MGM can’t manage its bank debt, how is MGM going to make more equity contributions?” Cohen said. “Maybe the answer is, well, that gives Dubai World leverage, and they want to control much more than half of this joint venture when it’s all over.”
Dalton said there was “no certainty” the casino operator could continue to operate even until May 15 -- and that could jeopardize the massive development, the first stage of which is to open late this year.
“Our concern is for the long-term health of the project,” he said. “We want to see some certainty [from MGM] before we continue with our obligations.”
Cohen said the lawsuit made it more difficult for MGM Mirage to refinance its debt.
“When you file a lawsuit that charges mismanagement and a breach of fiduciary duty, how do you have a refinancing discussion with that kind of talk?” Cohen said Monday.
MGM Mirage did not immediately respond to a request for comment.
