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Rating Action:

Moody's downgrades MGM's PDR to Caa3, outlook negative

19 Mar 2009

Approximately $7.8 billion of debt affected

New York, March 19, 2009 -- Moody's Investors Service today downgraded MGM MIRAGE's Probability of Default Rating (PDR) to Caa3 from Caa2 and its Corporate Family Rating (CFR) to Caa2 from Caa1.

The downgrade reflects the very short-term -- through May 15, 2009 - of the waiver of potential covenant defaults that the company received from its bank lenders. It also reflects the $300 million reduction in cash MGM was required to use to repay a portion of the company's revolving credit facility. MGM cannot re-borrow this $300 million without lender consent, and hence the reduction in cash erodes MGM's liquidity position. This, combined with the short tenor of the waiver, places significant pressure on the company to relatively quickly come up with a plan to obtain additional bank concessions, raise additional liquidity, or pursue a major restructuring of its capital structure. "Because of these factors, there is a rising probability that as part of a restructuring MGM will have to offer to exchange existing debt for an amount below par as part of any plan to alleviate its liquidity crunch," said Moody's Senior Analyst Peggy Holloway.

Moody's affirmed MGM's SGL-4 Speculative Grade Liquidity rating, indicating weak liquidity. Moody's estimates that internally generated cash, net proceeds from the pending sale of Treasure Island together with cash on hand will not be sufficient to fund the company's obligations over the next 12 months. Such cash needs include its obligations to help fund ongoing construction at its CityCenter joint venture project, and required bond maturities through year-end 2009.

Given the company's strong market share and solid fundamental franchise within the gaming industry, we use a fundamental evaluation approach to estimate loss-given-default rather than the mean family-level LGD estimate. Based on this approach, the company's recovery estimate is 65%. The lower loss estimate resulted in the probability-of-default rating (Caa3) deviating from the Corporate Family Rating (Caa2) by one notch.

The rating outlook is negative reflecting the challenges MGM faces to improve its liquidity profile in the near term to avoid an eventual default.

Ratings downgraded or affirmed; assessments updated:

MGM MIRAGE

Corporate Family Rating to Caa2 from Caa1

Probability of default rating to Caa3 from Caa2

Senior unsecured notes to Caa2 (LGD 3, 33%) from Caa1 (LGD 3, 33%)

Senior subordinated to Ca (LGD 5, 85%) from Caa3 (LGD 5, 85%)

Senior secured notes affirmed at B1 (LGD 2, 12%)

Mirage Resorts

Senior unsecured notes to Caa2 (LGD 3, 33%) from Caa1 (LGD 3, 33%)

Mandalay Resort Group

Senior unsecured notes to Caa2 (LGD 3, 33%) from Caa1 (LGD 3, 33%)

Senior subordinated to Ca (LGD 5, 85%) from Caa3 (LGD 5, 85%)

Rating affirmed:

MGM MIRAGE

Speculative Grade Liquidity Rating at SGL-4

Moody's latest rating action was on March 10, 2009, when the MGM MIRAGE's CFR and PDR were each downgraded to Caa1 and Caa2, respectively.

The principal methodology used in rating the MGM MIRAGE was Moody's Global Gaming Methodology, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the rating Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.

Headquartered in Las Vegas, Nevada, MGM MIRAGE owns and operates 17 properties located in Nevada, Mississippi and Michigan, and has investments in three other properties in Nevada, New Jersey and Illinois. MGM MIRAGE has a 50% interest in CityCenter Holdings, Inc., a mixed-use project on the Las Vegas Strip and a 50% interest in MGM Grand Macau, a hotel-casino resort in Macau S.A.R.

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

New York
Peter H. Abdill, CFA
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades MGM's PDR to Caa3, outlook negative
No Related Data.
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