MGM Mirage To Part Ways with Borgata (MGM)

On March 12th before the open, MGM Mirage (NYSE: MGM) announced that it has entered into a settlement with the NJ Division of Gaming to sell 50% of its ownership interest in the Borgata Hotel Casino & Spa. MGM will cease business as a gaming licensee in NJ, pending approval of the New Jersey Casino Control Commission, which will hold a hearing on March 17th.

As reported by David Katz and Mariya Slavin of Oppenheimer, MGM will place its 50% interest in Borgata and related leased land into a divestiture trust. The sale of the trust property must be completed within 30 months. In the first 18 months, MGM will be allowed to direct the trustee to sell the trust property, subject to approval of the commission. If a sale isn't concluded in that time frame, the trustee will be responsible for the sale within a 12-month period.

Prior to the sale, the divestiture trust will retain any cash flows received in respect of the
assets in trust, but will pay property taxes and other costs related to the trust property to the degree that minimum trust cash balances are maintained. MGM will be the sole beneficiary of the trust and will be permitted to reapply for a New Jersey license 30 months after the completion of the sale.

These reporters maintain their overall thesis that MGM has been able to successfully manage challenges and remove near-term liquidity pressures. Nonetheless, with operating visibility likely to remain limited, Katz and Slavin believe the shares of MGM warrant a cautious approach.

MGM is down 2.8% today to $11.46 a share. It has shown positive growth since hitting $2.28 a share almost a year ago, but has shown shaky results since the beginning of 2010.