LOS ANGELES, Oct 13 (Reuters) - MGM Resorts International shares fell 9 percent on Wednesday as both the largest casino operator on the Las Vegas Strip and its biggest shareholder sold stock.
MGM and Tracinda Corp, the investment vehicle of billionaire Kirk Kerkorian, said late on Tuesday they would sell up to 47 million and 32 million shares, respectively. The offer price was set at $12.65 -- 7 percent below Tuesday's close.
The new shares could raise close to $600 million for MGM -- which is focused on paying down $12.9 billion in debt -- but will also dilute the holdings of current shareholders by around 10 percent.
The sale will also cut Tracinda's stake to about 30 percent from the current 37 percent. Kerkorian once owned more than half of MGM, but the holdings fell after a May 2009 stock offering.
'This was unexpected, timing is curious, and reason(s) unclear,' Deutsche Bank analyst Chris Woronka said in a research note, referring to the Tracinda sale. 'MGM's offering should bolster liquidity, but we believe some investors would prefer to see a $1.5 to $2 billion-plus deal that more fully addresses debt maturities through 2013.'
MGM also reported on Wednesday that preliminary third-quarter results were largely in line with Wall Street expectations.
The casino industry has been hit hard by the recession and global financial crisis, which led to a sharp drop in gambling revenue and hotel room rates.
Investors in MGM, and other Vegas casino operators including Wynn Resorts Ltd and Las Vegas Sands Corp , were buoyed by Nevada's report last week that Strip casinos won 21 percent more money in August than a year earlier.
But MGM's write-offs for the quarter -- another $182 million for impairment to the CityCenter, the $8.5 billion project that opened on the Las Vegas Strip in December, and $46 million for CityCenter condominiums -- were worse than expected, according to Janet Brashear at Sanford Bernstein.
'Continued write-offs make the financial picture more uncertain, especially as it relates to CityCenter liability; however, the pending Borgata sales represents progress in resolving loose ends,' she said in a research note.
MGM said it found a buyer for its 50 percent stake in the Borgata resort in Atlantic City, New Jersey, at a price that would generate around $250 million.
MGM has been looking to sell its stake after New Jersey regulators questioned the suitability of Pansy Ho, the company's joint venture partner in China's Macau.
Barclays Capital, the investment banking subsidiary of Barclays Plc, is the sold underwriter for MGM's stock offering.
MGM shares, which have risen about 36 percent so far this year, were trading at $12.34 in afternoon trading on the New York Stock Exchange. Keywords: MGMRESORTS/ (deena.beasley@thomsonreuters.com; + 1 213-955-6746) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MGM and Tracinda Corp, the investment vehicle of billionaire Kirk Kerkorian, said late on Tuesday they would sell up to 47 million and 32 million shares, respectively. The offer price was set at $12.65 -- 7 percent below Tuesday's close.
The new shares could raise close to $600 million for MGM -- which is focused on paying down $12.9 billion in debt -- but will also dilute the holdings of current shareholders by around 10 percent.
The sale will also cut Tracinda's stake to about 30 percent from the current 37 percent. Kerkorian once owned more than half of MGM, but the holdings fell after a May 2009 stock offering.
'This was unexpected, timing is curious, and reason(s) unclear,' Deutsche Bank analyst Chris Woronka said in a research note, referring to the Tracinda sale. 'MGM's offering should bolster liquidity, but we believe some investors would prefer to see a $1.5 to $2 billion-plus deal that more fully addresses debt maturities through 2013.'
MGM also reported on Wednesday that preliminary third-quarter results were largely in line with Wall Street expectations.
The casino industry has been hit hard by the recession and global financial crisis, which led to a sharp drop in gambling revenue and hotel room rates.
Investors in MGM, and other Vegas casino operators including Wynn Resorts Ltd and Las Vegas Sands Corp , were buoyed by Nevada's report last week that Strip casinos won 21 percent more money in August than a year earlier.
But MGM's write-offs for the quarter -- another $182 million for impairment to the CityCenter, the $8.5 billion project that opened on the Las Vegas Strip in December, and $46 million for CityCenter condominiums -- were worse than expected, according to Janet Brashear at Sanford Bernstein.
'Continued write-offs make the financial picture more uncertain, especially as it relates to CityCenter liability; however, the pending Borgata sales represents progress in resolving loose ends,' she said in a research note.
MGM said it found a buyer for its 50 percent stake in the Borgata resort in Atlantic City, New Jersey, at a price that would generate around $250 million.
MGM has been looking to sell its stake after New Jersey regulators questioned the suitability of Pansy Ho, the company's joint venture partner in China's Macau.
Barclays Capital, the investment banking subsidiary of Barclays Plc, is the sold underwriter for MGM's stock offering.
MGM shares, which have risen about 36 percent so far this year, were trading at $12.34 in afternoon trading on the New York Stock Exchange. Keywords: MGMRESORTS/ (deena.beasley@thomsonreuters.com; + 1 213-955-6746) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.