MGM Mirage keeps eye on Macau in US$548 million write-down on land

HONG KONG: MGM Mirage has taken a US$548 million (RM1.86 billion) write-down on land in the US as it prepares for a Hong Kong listing for its Macau partnership with Pansy Ho Chiu-king, possibly by mid-year.

The casino developer took the non-cash charge on a 120-acre plot of land at Renaissance Point in Atlantic City. The move was part of divestiture settlement negotiations with the New Jersey Division of Gaming Enforcement. Investigators there last year found the Macau joint venture with Ho to be "unsuitable" following a four-year investigation.

The US firm previously carried the value of the land at US$745 million as of September. It said the write-down was a major factor behind the US$433.92 million net loss it reported last Friday for the three months to December.

Last year's finding by New Jersey gaming regulators meant MGM would likely face a difficult choice. It could keep its business in Macau, which includes the US$1.25 billion MGM Grand Macau. Or it could preserve its 50% stake in Atlantic City's 2,771-room Borgata casino hotel and the wholly-owned plot of undeveloped land surrounding the casino. But not both.

An exodus from New Jersey is now all but certain given the write-down on Renaissance Point, ongoing negotiations with US regulators and moves towards a Hong Kong listing of the Macau business.

"We disagree with the New Jersey Division of Gaming Enforcement's recommendation to the Casino Control Commission concerning our Macau partner, but believe pursuing a settlement with the DGE represents the best course of action for our company and its shareholders," MGM chairman and chief executive Jim Murren said earlier this month in a statement. "We would like to put this matter behind us and move forward with the compelling growth opportunities we have in Macau."

The Macau units of MGM's Las Vegas rivals -- Wynn Macau and Sands China -- raised a combined HK$33.9 billion (RM14.86 billion) by selling shares in Hong Kong late last year. Analysts have postulated that a spin-off of MGM and Ho's Macau business could raise up to US$1 billion at the high end.

Murren said on a conference call last Thursday the partners were targeting a mid-year or possibly a third-quarter share sale.

The MGM Grand Macau booked operating income of US$22 million on earnings before interest, tax, depreciation and amortisation (Ebitda) of US$46 million during the fourth quarter. That was down from US$73 million Ebitda during the third quarter but up from US$17 million Ebitda a year earlier.