MGM Mirage (MGM) has offered to exchange a part of its $782 million 8.5% senior notes due next year for up to $500 million of 10.00% Senior Notes due 2016. This swapping would harness liquidity and also allow the company to extend the time to repay its debt at the cost of a somewhat increased debt level and interest expenses.

The exchange offer will expire September 24, 2009, unless extended by MGM. For each $1,000 in principal amount of existing notes tendered and accepted, the holder will receive $1,175 principal amount of new notes, of which $50 in principal amount of New Notes represents early participation payment only to those who tender notes before the close of business on September 10, 2009.

Casino operator MGM Mirage has been severely impacted by the recession. The company reported a loss of $212 million in the second quarter as it incurred significant impairment charges.

However, the company has a strong pipeline of projects and has implemented several cost-control initiatives, which are expected to lead to its earning growth going forward. The company is now trying to expand in Asia and Middle East without investing in land and development, but as a franchisor.

MGM Mirage owns and operates 16 casinos in Nevada, Mississippi and Michigan and has a 50.0% interest in four other casino resorts. The company also operates luxury hotels in the Middle East and Asia.

MGM which is partly controlled by billionaire investor Kirk Kerkorian, has a diversified model which allows it to withstand weaker economic times relatively well. The company has international exposure coupled with its diversification within the U.S., which bodes well going forward. Also this swapping of senior notes provides the much needed short-term liquidity to the company though the debt level increases a bit.
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