I suspected something was brewing at MGM Mirage. Its earnings announcement was overdue with nary a peep. Then, instead of reporting its fourth-quarter earnings, MGM filed two other SEC forms. The first one was to confess they had tapped out their $4.5 billion revolving credit line by withdrawing the last remaining $842 million. And the second filing confessed why it was late with its earnings announcement. In a nut shell, MGM’s finances have shit the bed and it has its hands full. It is about to be in breach of its senior debt covenants – and if that happens, MGM’s debt laden house of cards starts to collapse.

Just to be sure everyone got the message, MGM added, “it is likely that…the Registrant’s consolidated financial statements for the year ended December 31, 2008 will contain an explanatory paragraph with respect to the Registrant’s ability to continue as a going concern.” Translated, this means if MGM isn’t able to sweet talk its senior debt holders into revising their agreement, bankruptcy is the next stop down the line.

MGM is carrying a mountain of debt, primarily related to the $9 billion CityCenter project. And a lot of it is scheduled to come due in the next couple of years. They have about $1.2 billion due this year and about another $1.1 billion due next. MGM will get a nice check for $500 million on its sale of Treasure Island this year, but that ain’t gonna get it done.

Speaking of which, it looks like Phil Ruffin is the only one who has successfully played the casino downturn. He sold his New Frontier property for about $1.2 billion (about $35 million per acre) at the height of the market and bought Treasure Island for $775 million (about $15 million per acre).

Normally, MGM’s debt might be manageable. But credit continues to be tight and casinos look like a bad bet to banks who all of a sudden think they know how to recognize one. But MGM’s current debt holders are between a bit of a rock and a hard place, themselves. Banks don’t want big debt going into default – it totally fucks up their already fucked up balance sheets. So MGM might be able to work out a deal with its current lenders – but I suspect the deal will only come after MGM agrees to put some more properties up for sale.

Harrah’s stock is no longer publicly traded; otherwise we’d be hearing a lot more about their current debt issues. It doesn’t have a multi-billion expansion holding them down. Harrah’s ridiculous amount of debt is a holdover from the $17 billion leveraged buyout by private equity companies Apollo Management and TPG. But since Harrah’s debt is publicly traded, it still has to file with the SEC. On February 13, Harrah’s filed that it, too, was drawing down the last of its revolving credit facility — the last $740 million of its $2 billion. It said it was also suspending matching contributions to employee retirement plans. Harrah’s also put finishing approximately 600 rooms in the Octavius Tower (Caesar’s) on hold.

If MGM can’t see its way through its current debt problems, it won’t be the first casino company to file for bankruptcy this year. Trump Resorts already beat them to it. And Station Casinos, who has debt associated with taking itself private in an $8 billion management-led buyout, has already reserved the next spot in line. Interestingly enough, Boyd Gaming bid $950 million in cash for some of Station’s assets. Boyd’s not in particularly great shape, itself, but figured it might be able to get some properties on the cheap. Station wasn’t interested, telling Boyd, “Should circumstances change, we’ll call you.” So it doesn’t look like a honeymoon in Vegas is gonna happen for these two. Station’s bondholders have until April 10th to approve a restructuring plan that would put the company under bankruptcy protection.

Photo Notes: All pictures taken in Vegas in May 2006.