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Rating Action:

Moody's changes MGM's ratings outlook to negative; affirms ratings

26 Apr 2007
Moody's changes MGM's ratings outlook to negative; affirms ratings

Approximately $13 billion of debt affected

New York, April 26, 2007 -- Moody's Investors Service affirmed MGM MIRAGE'S (MGM) existing ratings, including its Ba2 corporate family rating and speculative grade liquidity rating of SGL-3, and changed the ratings outlook to negative. The change in outlook reflects an approximate $735 million increase in cash outflows to secure future growth opportunities, as well as a recently announced $400 million increase in the cost estimate for CityCenter that will result in higher than anticipated leverage over the next several years. Additionally, MGM MIRAGE has announced a series of joint venture opportunities that may result in higher investment spending that could hamper the company's ability to reduce leverage to a more comfortable level for the rating category. Although MGM MIRAGE has significant development experience, the scale and number of projects underway are increasing the business risk profile of the company.

Moody's last rating action on MGM occurred April 2, 2007 when the SGL rating was lowered to SGL-3 from SGL-2. At that time Moody's noted MGM's 12-month projected liquidity cushion had significantly tightened due to upcoming maturity of approximately $1.4 billion in notes coupled with capital spending that MGM has planned for CityCenter, and the Detroit permanent facility (which is scheduled to open in the fourth quarter of 2007). Since then, $575 million of Las Vegas land purchases and the $160 million M Resort investment have been announced. Nevertheless, SGL rating improvement to SGL-2 is possible if MGM refinances some of its upcoming amortizations, though the level and timing of new debt issuance will factor heavily into the likelihood of SGL rating upgrade.

Pursuant to Moody's Global Gaming Methodology MGM MIRAGE maps to an overall Ba rating, however, leverage is reflective a single B rating category. On a Moody's adjusted basis, debt to EBITDA is estimated to increase to between 6.7x -- 7.0x in 2007 and 2008, before CityCenter would complete and residential proceeds would reduce leverage. The affirmation reflects the positive earnings outlook and return profile of City Center and the Detroit permanent facility. The ratings could be downgraded if expected spending for growth opportunities increases further over the next three years or if expected earnings growth slows, depending on materiality and other factors such as timing of cash outflows for new investments or future assets sales.

Ratings/Outlook Changes:

All existing ratings affirmed

MGM Mirage outlook from stable to negative

Mirage Resorts, Incorporated outlook from stable to negative

Mandalay Resort Group outlook from stable to negative

Headquartered in Las Vegas, Nevada, MGM MIRAGE owns and operates 19 properties located in Nevada, Mississippi and Michigan, and has investments in three other properties in Nevada, New Jersey and Illinois. MGM MIRAGE has also announced plans to develop CityCenter, a multi-billion dollar mixed-use urban development project in the heart of Las Vegas, and has a 50 percent interest in MGM Grand Macau, a hotel-casino resort currently under construction in Macau S.A.R (which is expected to open in the fourth quarter of 2007). Consolidated revenue for 2006 was about $7.2 billion.

New York
Tom Marshella
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Peggy Holloway
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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