MGM Mirage Debt Swap Likely

March 27, 2009

Fitch ratings on Monday cut its rating on MGM Mirage to ‘C’, one step above default, and warned a distressed debt exchange of the casino operator’s bonds seems imminent.

Fitch cut MGM’s debt rating three notches from ‘CCC’ and said it was unable to give an outlook because of the debt’s high level of risk. MGM last week reported a fourth-quarter loss of $1.15 billion and said its banks had agreed to waive debt covenants through May 15.

MGM is exploring alternatives including asset sales to improve its liquidity.  Raising new debt or equity would be challenging for MGM unless Kirk Kerkorian, the casino operator's majority shareholder, also "contributes a significant amount of additional capital alongside investors," Fitch said.

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