MGM Mirage (MGM) has just announced its intention to make a private placement of $350 million worth of senior unsecured notes due 2018. The company will use the net proceeds to decrease borrowings under its senior credit agreement and for general corporate purposes.

Recently, MGM also 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 of senior notes provides the much needed short-term liquidity to the company though at the cost of a somewhat increased debt level and interest expenses.

The recession has severely impacted the results of the casino operator MGM Mirage, which has reported a loss of $212 million in the second quarter as it incurred significant impairment charges.

However, with a strong pipeline of projects and implementation of several cost-control initiatives, we expect MGM’s earnings to benefit going forward. The company is now trying to expand in Asia and the Middle East through franchises, a wise move to curb capital expenditure and sustain growth.

Partly controlled by billionaire investor Kirk Kerkorian, MGM Mirage has a diversified model which allows it to withstand weaker economic times relatively well. The company has international exposure and is well diversified within the U.S. These positive attributes coupled with the recent capital bolstering initiatives provide the much needed capital flexibility for the short-term and hence augur well going forward.

Zacks Investment Research
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