Plans to cut costs lift MGM shares
Shares of MGM Mirage, the casino company majority-owned by billionaire Kirk Kerkorian, rose the most in almost 19 years after it shelved two planned casino developments and outlined cost reductions that would save $500 million a year.
Chief Executive Terrence Lanni said most of the expense cuts were permanent. He is halting work on the company’s planned MGM Grand Atlantic City casino resort and indefinitely delaying a joint venture on the Las Vegas Strip with Kerzner International Ltd., the owner of the Atlantis casino in the Bahamas.
Cutting costs and delaying the projects may help MGM Mirage cover loans and finish its $11.2-billion CityCenter project on the Las Vegas Strip. Finding funds for new developments has become increasingly difficult amid the global financial crisis.
The company reported that third-quarter profit tumbled 67% as cash-strapped gamblers in the U.S. avoided Las Vegas.
Shares of MGM Mirage increased $3.42, or 33%, to $13.75.
Net income dropped to $61.3 million, or 22 cents a share, from $183.9 million, or 62 cents, a year earlier, the owner of 10 Las Vegas casinos said. Revenue slid 5.9% to $1.79 billion.
The 91-year-old Kerkorian and Dubai World, the government-owned investment group, are the largest shareholders in MGM Mirage. The two are developing the CityCenter complex of hotels, casinos and condominiums on the Las Vegas Strip, scheduled to open before the end of next year.
The financial crisis and Las Vegas’ decline have made it harder for the partners to get loans to finish the project. They have raised $1.8 billion of the $3 billion they need, according to Oct. 6 filings.
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