Boyd, MGM make investors smile

One delay and one continues, but both have the same result: investor satisfaction. MGM Mirage last week downplayed reports that it was having trouble finalizing funding for its CityCenter project in Las Vegas. While admitting that financing has not been finalized, MGM Mirage CFO Dan D’Arrigo expects no delays in construction and the expected late 2009 opening of CityCenter.

“I don’t think it’s any surprise to anyone that the financial markets are not what they once were,” D’Arrigo said. “The credit crunch is real and it’s one that we – like any other company out there looking to raise capital – have to deal with.” He said the company has approached about a dozen banks to participate in the financing and over half of them have agreed to sign up. Though MGM Mirage posted a loss, the news about CityCenter and changes in its slumping Macau operation were seen as a positive, sending company stock upward after the call. Meanwhile, shares of Boyd Gaming climbed more than 20 percent last week on news that the company was delaying work on its Echelon project, and many say the company had no choice but to do what it did.

Still, some think the move might end up driving up the total cost of the project when Boyd looks for financing to resume construction work next year.

Right now, the move looks to be well timed and should leave the company in a strong position. The long-term costs remain to be seen. Financing rates when the project was announced in 2006 were lower than they are now. As recently as one year ago, Boyd locked down an interest rate below 5 percent on a loan of more than USD 3 billion.

But the company was also counting on financing from a number of partners, including a deal with General Growth Properties for the USD 500 million retail component and a deal with Morgans Hotel Group to build the Mondrian and Delano hotels.

Boyd executives remain confident that financing will be available in about a year.

“When we financed the USD 3.3 billion, gas was USD 2.50 a gallon,” said Rob Stillwell, vice president of communications for Boyd Gaming. “Everything was different and nobody thought we’d be faced with this type of adversity. A lot can change in a year.”