MGM Resorts International (MGM)

[eastunder]

MGM's Q4 Raises Bankruptcy Chatter
Jeanine Poggi
02/18/10 - 11:15 AM EST

http://www.thestreet.com/_yahoo/story/10684123/1/mgms-q4-raises-bankruptcy-chatter.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

(MGM Mirage's earnings reports article updated with additional analyst commentary and detail on MGM's quarterly performance.)
LAS VEGAS (TheStreet) -- MGM Mirage's(MGM Quote) disappointing fourth-quarter results are raising concerns among investors that bankruptcy could be looming.

Shares of the casino operator are tumbling 6.8% to $10.83 in Thursday morning trading after MGM narrowed its fourth-quarter loss but still failed to meet Wall Street's expectations.

Message boards are heating up with investors predicting MGM will file for bankruptcy before the end of the year.

MGM has significant exposure to the Las Vegas strip, which analysts believe won't see a turnaround in the near future. Despite management's upbeat view on the stabilization in group booking and visitation rates, Sterne Agee analyst David Bain says it is nothing to get excited about as pricing remains weak.

"MGM won't work its way through this situation by just cutting costs and earnings power, regardless of a rebound on the strip," says Alex Calderone, who provides turnaround and crisis management services for the gaming sector at Conway MacKenzie.

Still it may be premature to discuss bankruptcy since MGM has the backing of its bankers and many valuable assets under its belt.

Instead, Calderone says MGM will look to extend maturities, modify ammoritization schedules or conduct debt exchanges. As a last resort, they may even sell some of their assets.
But MGM will most likely hold off on any sale of casinos until multiples and valuations improve.

During the quarter, the casino operator lost $433.9 million, or 98 cents a share, compared with a loss of $1.15 billion, or $4.15 a share in the year-ago period.

Excluding an impairment charge to write down the value of undeveloped Atlantic City land and other items, it lost 21 cents per share.

Revenue dropped 11% to $1.45 billion from $1.62 billion last year.

Much of MGM's focus this quarter was on the opening of its $8.5 billion CityCenter development, which launched in December.

The massive hotel-casino posted operating income of $7 million, with depreciation and amortization of $9 million at its Aria unit.

This follows a similar fourth-quarter report from rival Las Vegas Sands(LVS Quote), which also narrowed its loss.
On an adjusted basis, Sands earned 3 cents a share, a penny more than analysts' estimates for the casino owner. Las Vegas Sands' revenue increased about 17% to $1.28 billion from $1.09 billion last year.

MGM and Sands received a boost from their Macau operations, which offset weakness in Las Vegas. But both companies are starting to see a turn in business on the strip.

MGM CEO Jim Murren said in a statement that the company's convention booking pace gained some steam in the fourth quarter, with more than 440,000 future room nights booked.

Meanwhile, revenue per available room for the Las Vegas Strip fell 16%, which was a smaller drop than the 23% plunge it reported in the third quarter.

-- Reported by Jeanine Poggi in New York.