Home » VT News » Four More Years!

Four More Years!

By Chuckmonster on Friday, 9th November 2012 9:30am
  » filed under Las Vegas  comments: 13


MGM Resorts International announced yesterday that they have extended the contract of CEO Jim Murren until late 2016. While this is certainly not great news for shareholders it is great news for this gaming biz watcher slash comedy writer.

But seriously folks... Jim Murren has been a failure for MGM Resorts International. City Center - a project he often takes full credit for - was a disaster in conception and execution of which only Aria has started to show signs of making a turn around. The much ballyhooed renovation of the M Life program has been a thorough failure as a technical endeavor and a player relationship mechanism. Players have had earned credits deleted, tiers suddenly revoked, comp offers yanked and withstood the black hole that is MGM's customer service.

Stockholders vote with their money... driving share prices up and down as their confidence in the company ebbs and flows. MGM has lost 4.42% of its value since Murren took over in November 2008... even more if you factor in the numerous stock offerings they've floated, the sale of Treasure Island, their forced hand to divest Borgata, the write off of their stake in M Resort, the Harmon debacle, the carving out of the Macau business into MGM China LTD AND the Marriott-inspired international non-gaming brand licensing operations. How many layers of the onion can we peel away before there is no more onion and everyone in the room - except the management team - is crying?

What you're left with is the quivering shell of an over leveraged company who are most possibly worth more dismantled than as the messy conglomerate it has devolved into.

A peek at this slide from a recent investor presentation reveals that most of MGM's paid for portfolio is in hock to pay for Murren's grand debt experiment. NYNY owes $750M at 13% interest! Bellagio and Mirage are securing two notes... $640M at 10.4% and $850M at 11.1%... freshly renovated MGM Grand is leveraged for another $845M at 9%.... $3 billion dollars in "mortgage equity loans" generating $336,000,000 in annual INTEREST at 10.84%.


The answer to de-lever the company - as stated in the most recent earnings call - is to open new casino in Maryland (more debt) open a new casino in Toronto (more debt) and do phase two of MGM Grand Macau (more debt) and build a Bellagio on Cotai (you guessed it... more debt.)


Tagged: murren   


Comments & Discussion:

It's almost as if MGM is too proud to admit that Murren is ruining their company and would rather build this illusion that their choice of him as CEO was wise and they could never make a poor decision.

That or no one is brave enough to fill his shoes to clean up the mess he's made.

I'm technically an MGM Resorts shareholder as some of the funds I am invested in via my SIMPLE IRA have stakes in the company, and I don't like this one bit. MGM Resorts has been teetering on the brink for several years now because of CityCenter and I would not be surprised if MGM Resorts is filing for CH. 11 within the next 12-18 months if not earlier (Caesars Entertainment will be as well, likely sooner than MGM.). I also see them having no other choice but to sell off assets in Nevada and perhaps Mississippi in order to cut down their debt load, and such a move would be a last ditch effort to stave off bankruptucy.

You cannot get out of debt by piling up more debt opening up new resorts in order to make back some of the $$$ lost to other gaming destinations.

^^^Said by nearly every commenter on this site since 2008. We'll see.

MGM will not go bankrupt. It's debt to EBITDA ratio is only 2.5x
Caesars is much more levered, but let's not forget that it is owned by private equity funds (whose specialty are leveraged buyouts). In fact, I would bet that a good portion of Caesars' debt is owned by those same PE funds (Apollo, TPG and Blackstone).

Also, a $336 million interest expense is not much for a company with $4+ billion
operation income and $600+ million operating cash flow

Bellagio Cotai? Nice!!!!

I still find it funny that Aria finally approaches profitability and it's been due to making it more like the resort hotels and malls that preceded it. Brilliant!

Why is LVS so valued?

At least Jim has the minimal sense to keep is fool mouth shut most of the time *cough* Sheldon**hack*Steve**hack hack*; sorry, must be coming down with something, and none of MGM's places have fallen into the outright dialapidation of Cesars....yet. >_>

^^ because LVS dropped something like 99% of its peak value in the Spring '09 collapse. It had nowhere to go but up, and Macau was already a money factory. Woulda been a better return than even AAPL, damn it.... of course I lacked guts to buy.

This is where I respectfully disagreed w/ the late, great Jeff Simpson and agreed w/ Hunter: consolidation, bad. Variety of individual resorts, good.

For what it's worth:

@Jinx, what are you refering to at Aria?? I have stayed there a few times and never found it that different from the other resorts. What changes did they make?

Donny, I look at some of the mall changes, while not kiosks, at least bringing a few tenants in that aren't pure high end, and moving away from the marketing of the resort being different and something that isn't Vegas.

My statement was probably a bit of an exaggeration, since there haven't been ground breaking changes, but at least MGM hasn't continued to try and paint the picture of Aria as something radically different from the currrent resorts on the strip.

Comments Are Closed

Subscribe via RSS

Recent Comments:

michigan2010 posted: "MGM equals cookie cutter casino. No to reason to step foot in Bellagio again. Just hope they don't screw up..."
» Sayonara Bellagio Table Game Canopies...
saharalv posted: "I wish the editors were the entire electoral college in 2016...."
» Introducing the Trippies Class of...
fatbastard posted: "So many people letting a billionaire live rent free in their heads. Funny. Too bad it also detracts from the..."
» Introducing the Trippies Class of...
wpsteel66 posted: "Total bummer…talk about taking the class and uniqueness away from the Bellagio…another smart move on CEO Jim and making all..."
» Sayonara Bellagio Table Game Canopies...
damania posted: "Is there a podcast?..."
» Introducing the Trippies Class of...

» More Comments