Dubai World Unit Sues MGM Mirage

The lawsuit, filed in the Delaware state Chancery Court in the US, aimed “to protect its rights and the best interests of the CityCenter project,” Dubai World said Monday.

MGM Mirage is burdened with more than $13 billion in debts related to CityCenter, its largest private development in the US so far.

MGM Mirage spokesperson Yvette Monet said she had no immediate comment on the lawsuit, when contacted at her Las Vegas office by Khaleej Times .

Dubai World said that MGM’s recent disclosure to the US Securities and Exchange Commission — in which MGM said it doubted CityCenter’s viability as a going concern — constitutes a breach of contract.

In its lawsuit, Infinity World said it sought “declaratory relief from obligations under the joint venture agreement as a result of 
MGM’s breach.”

In its 10-k filing with the SEC, MGM said it “cannot provide assurance” that its business would generate sufficient cash flow from its operations, nor that it would be able to borrow enough money under its senior credit facility to pay off its debts or fund its other needs.

CityCenter is a mixed-use luxury residential, resort and retail complex being developed by MGM on 67 acres between the Bellagio and Monte Carlo resorts on the Las Vegas Strip. It is owned by CityCenter Holdings LLC, the joint venture company owned equally by MGM and Infinity World. The complex, which started construction in 2005, is scheduled to open late this year.

Dubai World said MGM’s admission that it cannot guarantee its ability to meet its future payments for CityCenter left the company with no option but to file the lawsuit.

“The current path of the project is simply unsustainable given our partner’s financial troubles, “ Dubai World said.

Dubai World also accused MGM of mismanaging CityCenter, with costs exceeding budgets despite a downsizing of some of the planned facilities.

As a result, Infinity World was forced to make capital contributions far in excess of the levels that MGM had originally estimated.

MGM said in August 2007 that CityCenter would cost an estimated $7.49 billion, but its costs have risen to about $8.8 billion. MGM anticipated being able to borrow $5 billion, revised that amount to $3 billion, and ultimately raised only $1.8 billion. Infinity World’s contributions to CityCenter to date total about $4.3 billion, Dubai World said. In its 10-K filing with the SEC, MGM said it obtained from its senior lenders a waiver of financial covenants that will expire on May 15. MGM’s lenders can then declare the company to be in default.

· rocel@khaleejtimes.com