Notes to Consolidated Financial Statements58
ally guarantee the Senior Credit Facility, senior notes, senior debentures, and senior
subordinated notes. MGM Grand Detroit, LLC is a guarantor under the Senior
Credit Facility, but only to the extent that the proceeds of borrowings under such
facilities are made available to MGM Grand Detroit, LLC. Substantially all of the
Company’s assets, other than assets of foreign subsidiaries and certain assets in use at
MGM Grand Detroit, were pledged as collateral for the Company’s senior notes,
excluding subordinated notes, and the Company’s bank credit facilities at December
31, 2004. See Note 18 for additional information.
The Company’s long-term debt obligations contain certain customary covenants.
The Company’s Senior Credit Facility contains covenants that require the Company
to maintain certain financial ratios. At December 31, 2004, the Company was
required to maintain a maximum leverage ratio (average debt to EBITDA, as
defined) of 5.5:1, which decreases periodically to 4.75:1 by December 2007. The
Company must also maintain a minimum coverage ratio (EBITDA to interest
charges, as defined) of 2.75:1. As of December 31, 2004, the Company’s leverage
and interest coverage ratios were 4.0:1 and 3.7:1, respectively.
Maturities of the Company’s long-term debt as of December 31, 2004 are as follows:
Years ending December 31 (In thousands)
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 476,426
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,527
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910,028
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,428
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,050,028
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400,076
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,511,513
Debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,192)
Swap deferred gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,541
$ 5,458,862
Amounts due in 2005 that were refinanced through available capacity under the
Company’s Senior Credit Facility have been excluded from current liabilities in the
accompanying consolidated balance sheet.
The estimated fair value of the Company’s long-term debt at December 31, 2004
was approximately $5.9 billion, versus its book value of $5.5 billion. At December
31, 2003, the estimated fair value of the Company’s long-term debt was approxi-
mately $6.0 billion, versus its book value of $5.6 billion. The estimated fair value of
the Company’s public debt securities was based on quoted market prices on or
about December 31, 2004 and 2003. The estimated fair value of the Company’s
outstanding credit facility borrowings was assumed to approximate book value due
to the short-term nature of the borrowings.
NOTE 9 — INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”).
SFAS 109 requires the recognition of deferred income tax assets, net of applicable
reserves, related to net operating loss carryforwards and certain temporary 
differences. The standard requires recognition of a future tax benefit to the extent