A Stern Glance

MGM MIRAGE (NYSE: MGM – News) announced today that it expects to record a pre-tax non-cash impairment charge of approximately $955 million related to its investment in CityCenter; such charge will be reflected in the Company’s statement of operations for the third quarter. In addition, CityCenter, the Company’s 50/50 joint venture with Infinity World Development Corp, is expected to recognize a $348 million non-cash impairment charge related to its residential real estate under development. MGM MIRAGE will recognize 50 [ercemt of such impairment charge, adjusted by certain basis differences, as a part of its income (loss) from unconsolidated affiliates for the third quarter of 2009. The net pre-tax impact of the CityCenter residential charge to the Company’s third quarter operating results is expected to be approximately $200 million.

MGM MIRAGE evaluates its joint venture investments for impairment whenever events or changes in circumstances indicate that the carrying value of its investment may have experienced an other-than-temporary decline in value. Based on revised operating forecasts developed by CityCenter late in the third quarter, MGM MIRAGE has now determined that the carrying value of the Company’s 50% investment is greater than its fair value and an impairment is indicated. The Company, based in part on consultations with third party valuation specialists, estimates the fair value of its 50% investment to be approximately $2.44 billion as of September 30, 2009.

CityCenter was required to review its residential inventory under development for impairment as of September 30, 2009, mainly due to CityCenter’s September 2009 decision to discount the prices of its residential inventory by 30 percent. This decision and related market conditions led to the conclusion that the carrying value of the residential inventory is not recoverable.

Tracinda Corp, the investment vehicle of billionaire Kirk Kerkorian, said today that it is exploring the possibility of strategic partnerships or other options regarding its investment in casino operator MGM Mirage

“Tracinda believes there is substantial unrecognized value in MGM Mirage and CityCenter that is not reflected in the market value of MGM Mirage’s stock,” the corporation said in a statement.

The company said it would not engage in any transaction until after CityCenter, the 67-acre complex of casinos, hotels and condominiums being built on the Las Vegas Strip, has opened on Dec. 16. The statement added that Tracinda may opt not to pursue any action.

Share on Facebook