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CityCenter suffers $45 million loss in fourth quarter

14 Feb 2012

By Howard Stutz
LAS VEGAS, Nevada -- MGM Resorts International said Monday that its CityCenter development had a net operating loss of roughly $45 million in the fourth quarter, but saw revenues increase roughly 4 percent.

The company, which owns the 67-acre Strip complex in a 50-50 partnership with Dubai World, preannounced quarterly earnings for CityCenter Aria Resort & Casino on Monday when it unveiled plans to refinance $240 million in debt.

In a statement, MGM Resorts said it plans to refinance the debt through a private placement and said the funds, along with cash on hand, would be used to pay off $300 million of CityCenter's $2.5 billion debt.

Earlier this month, MGM Resorts said it was amending its financing for portions of CityCenter debt to extend maturity dates by a year, to 2015.

JP Morgan gaming analyst Joe Greff called the refinancing a "prudent, opportunistic move" given that the credit markets have seemingly loosened in recent months.

"In our view, this further increases MGM's financial flexibility following previously disclosed actions that, collectively, enhance equity value," Greff told investors.

Union Gaming Group principal Bill Lerner said the refinancing should remove some restrictive covenants from CityCenter's debt and provide better financial flexibility to the development's balance sheet.

Fitch Rating Service gaming analyst Michael Paladino was also positive on the refinancing, saying the transaction would "allow CityCenter to accumulate an additional cash cushion."

MGM Resorts said CityCenter, which includes the 4,000-room Aria hotel-casino, would have net revenues of $269 million during the quarter ended Dec. 31, up from $257 million during the fourth quarter of 2010.

Meanwhile, CityCenter had an operating loss of roughly $45 million, down from an operating loss of $104 million in the 2010 fourth quarter.

MGM Resorts plans to release fourth-quarter and year-end earnings Feb. 22.

Susquehanna Financial Group gaming analyst Rachael Rothman told investors that CityCenter's fourth-quarter revenue bodes well for the company's fundamentals, however, "the larger-than-expected operating loss puts a negative bias on estimates."

Analysts focused on CityCenter's cash-flow estimates for the quarter, reported as earnings before interest, taxes, depreciation and amortization, which is expected to about $54 million, 10 percent above expectations.

"While we believe the (cash flow) result is somewhat negatively hold influenced, we anticipate the news will be well received," Deutsche Bank gaming analyst Carlo Santarelli told investors.

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