MGM repositions after Circus Circus

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It has been a good third quarter for MGM Resorts International, with the group reporting net revenues up nine per cent to $3.3bn, although operating income fell 42 per cent to $238m.

Although this sounds strange, there was an impairment charge of $219m in the quarter related to Circus Circus in Las Vegas and adjacent land property transactions. Otherwise income would have increased 11 per cent.

As a result there is a net loss of $37m if the impairment is included. Said Jim Murren, chairman and CEO: “We performed well in the quarter and our consolidated net revenues and adjusted EBITDA were up.

“Our Las Vegas Strip resorts saw an increase in revenues of four per cent with non-gaming revenues up six per cent. Gaming revenues overall were down three per cent because of ongoing weakness in Far East baccarat volumes.”

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He referred to two significant recent transactions – the sale of Circus Circus and an agreement with Blackstone that values Bellagio at $4.25bn, representing a purchase price multiple of 17.3x rent. He said that the sale of Circus Circus for $825m and the monetising of the Bellagio real estate assets would provide the company with net after-tax cash. The money would be used to reduce debt and return capital to shareholders.

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