MGM Resorts, Tracinda price shares at $12.65

AP News
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Posted: Oct 13, 2010 2:54 PM
MGM Resorts, Tracinda price shares at $12.65

Casino company MGM Resorts International hopes to raise as much as $595 million by pricing 47 million new shares at $12.65 each, the company said Wednesday.

The Las Vegas-based company, which announced the offering Tuesday, said its largest investor, billionaire Kirk Kerkorian, plans to sell as many as 32 million shares at the same price. That sale would lower the holding of Kerkorian's investment firm, Tracinda Corp., from its current 37 percent stake and could raise $404.2 million for Tracinda.

MGM Resorts' offering would increase the number of outstanding shares as much as 10.8 percent to 448.3 million.

The price is 24 cents per share above Wednesday's opening stock price of $12.41.

Shares of MGM Resorts were trading at $12.34 midday Wednesday; that's $1.27, or 9.4 percent, below Tuesday's close.

The new shares and Kerkorian's offer include options for underwriter Barclays Capital Inc. to buy shares if the stock is oversold. MGM Resorts is offering 40.9 million shares to investors and Barclays an option for 6.1 million more, while Tracinda is putting up 27.8 million shares for sale with an option of selling 4.17 million more.

If all the shares and options sell, Kerkorian would own 26.9 percent of the company.

Analyst David Bain of Sterne Agee & Leach, Inc., told investors Wednesday he was surprised MGM Resorts didn't offer more shares, assuming the demand is there at the price.

"The primary share offering should allow for additional wiggle room, including some debt repayment and cushion for potential covenant renegotiation with CityCenter lenders," Bain said. "We would have preferred to see a larger equity raise at near current stock levels."

MGM Resorts said it had $12.9 billion in debt as of Sept. 30.

As it announced the offer, MGM Resorts forecast a third-quarter loss of $317.2 million, down from the loss of $750.4 million it posted for last year's third quarter. The loss amounts to 72 cents per share, compared with a loss of $1.70 per share a year earlier.

Analysts surveyed by Thomson Reuters on average expected a loss of 69 cents per share.

The loss included $357 million, or 51 cents per share, to write down the value of MGM Resorts' investments in its newest casino complex in Las Vegas, called CityCenter, and in the Borgata Hotel Casino & Spa in Atlantic City, N.J.

The company's said the value of its half of CityCenter, a joint venture with Dubai World, fell $182 million, or 27 cents per share. A separate $46 million charge reflects the latest drop in the value of CityCenter's condominiums.

The writedown on CityCenter values it $2.28 billion _ far below what it cost to build, an amount MGM Resorts now tallies at $8.7 billion, including $232 million in new costs the company announced Tuesday.