Las Vegas’ CityCenter Project Facing Collapse?
The very survival hangs in the balance for Las Vegas’ largest employer and the city’s largest construction project- and arguably one of the world’s largest and most expensive buildings. MGM Mirage, operating nine Las Vegas Strip resorts and employing more than 61,000 workers, is now embroiled in a contentious lawsuit over the $9.1 billion, 76-acre CityCenter development with its half-shared partner, Dubai World through its Infinity World financial subsidiary.
Analysts said the lawsuit filed Sunday casts a damaging dark cloud over the project and sends more negative signals on the overall financial health of MGM Mirage. According to the lawsuit, Dubai World, a 50-50 joint venture partner in the CityCenter project, is seeking unspecified damages and wants to be relieved of its obligation under the companies’ agreement, which was struck in August 2007.
Dubai World, a world-leading business conglomerate suffering from a two-thirds drop in their oil prices – leading some to question if the lawsuit is merely trying to sever their joint venture agreement or simply gain more project control – said MGM Mirage, which is CityCenter’s managing partner, is responsible for mismanagement and cost overruns with the project. Dubai World further contends that statements by the MGM Mirage in the company’s financial filings last week with the Securities and Exchange Commission constitute a breach of the joint-venture pact and has put the project at risk.
The lawsuit took the MGM Mirage reportedly by surprise, but theirspokespeople responded vehemently yesterday that they are doing everything they can do and are ready, willing, and more than able to meet all financial obligations and debt holder payments.
Despite the lawsuit, CityCenter still plans to open in stages, starting in October with Vdara, a nongaming condominium and hotel tower, and Aria, CityCenter’s centerpiece 4,004-room hotel-casino, scheduled to open on December 16.
MGM Mirage continues to accept job applications, having over 90,000 job applications for the CityCenter project and planning to hire 10,000 employees to boost the staganant Las Vegas economy.
However, MGM Mirage and Dubai World are still seeking the remaining $1.2 billion in financing to finish the project.
MGM Mirage received from its lenders last week a two-month waiver to avoid violating its loan covenants. Some financial analysts believe that MGM Mirage might have to file a Chapter 11 bankruptcy to restructure their $13.5 billion in debt.