Most gaming companies are dropping expansion plans amid the economic downturn, but not MGM Mirage.
The casino operator said Thursday it had agreed to provide up to USD 1.6 billion to complete its joint venture CityCenter project on the Las Vegas Strip if outside financing cannot be secured.
MGM Mirage and joint venture partner Dubai World have each agreed to make additional equity contributions of up to USD 959 million, the company said in a regulatory filing. MGM said it had also agreed to partially guarantee the completion of CityCenter through a commitment to contribute up to another USD 600.0 million to the joint venture. The partners said last month they had finalized USD 1.8 billion, and received another USD 500.0 million in commitments toward the USD 3.0 billion in financing needed to complete the USD 9.1 billion development of hotels, condominiums and retail outlets.
The casino industry has been struggling as Americans have been less willing to take risks with their money amid job cuts, a housing downturn and a bear market on Wall Street.
Casino operator Pinnacle Entertainment, also based in Las Vegas, said Thursday that due to tight credit market conditions and increased competition, it has delayed plans to build a major development in Atlantic City, and it may seek to amend its credit facility. The company swung to a third-quarter loss, due partly to Hurricanes Gustav and Ike closing down some of its U.S. operations. Pinnacle operates casinos in Louisiana, Indiana, Missouri and Nevada.
Pinnacle posted a worse than expected quarterly loss of USD 11.8 million, or 20 cents per share, compared with a profit of USD 5.0 million, or 8 cents per share, in the same period last year. Revenue rose to USD 262.8 million from USD 237.6 million a year earlier. But analysts polled by Thomson Financial had expected a loss of just USD 2.7 million, or 7 cents loss per share, on sales of USD 258.2.
Shares in Pinnacle fell 8.4%, or 53 cents, to close at USD 5.78 on Thursday. Shares in MGM Mirage closed down 16.8%, or USD 2.68, to USD 13.31, on investor concerns about what the cash infusion for CityCenter will do to the company’s bottom line.
Market Vectors Gaming, an exchange-traded fund that tracks the casino industry, was down 7.4%, or USD 1.37, to close at USD 17.13, on Thursday. The fund traded as high as USD 45.00 early this year, shortly after it was introduced.