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NEW YORK — Shares of casino operators slid Wednesday as MGM Mirage's plan to raise $2.5 billion in capital did little to ease investors' concerns about the debt-laden company.
Earlier in the day the Las Vegas-based casino operator, which is majority-owned by billionaire Kirk Kerkorian, said it anticipated coming up with the capital through stock and bond offerings and would use the funds to pay off some of its more than $14 billion in debt and strengthen its balance sheet.
MGM, which had about $14.4 billion in debt as of March 31, will also amend an existing loan agreement. The casino operator has restructured its debt repeatedly this year as it made required contributions toward the $8.5 billion CityCenter casino development it is building in Las Vegas with Dubai World.
Goldman Sachs' Steven Kent said the moves could help MGM end the year with about $1.8 billion in cash, which could be put toward looming 2010 maturities. But the company still has further debt to get rid of, and may need to try asset sales, debt-for-debt exchange or another equity offering, he explained.
"This news is a modest positive in that it clearly lowers the bankruptcy risk for the company today vs. yesterday however we think shares already reflected this...,"Kent wrote in a client note.
The analyst reaffirmed a "Neutral" rating, with MGM's price target under review.
Robert LaFleur of Susquehanna Financial Group said the announcement gives MGM some more time to work on repaying its debt, but he still feels that "there is not sufficient equity in the company to justify the current stock price."
Among its peers, shares of Wynn Resorts Ltd. fell $3.73, or 8.3 percent, to $41.44 in afternoon trading. Las Vegas Sands Corp.'s stock declined $1.10, or 10.8 percent, to $9.15. Elsewhere in the sector, shares of Penn National Gaming Inc. slipped $1.37, or 4.3 percent, to $30.73. Boyd Gaming Corp.'s stock sagged $1.33, or 12 percent, to $9.79. Aside from MGM's news, the broader market dropped on softer-than-expected April retail sales.
