MGM Mirage's (MGM) City Center Could Seek Bankruptcy Protection

March 27, 2009 7:49 AM EDT

MGM Mirage (NYSE: MGM) and investment partner Dubai World are unlikely to make a $220 million payment due later today on City Center, according to the WSJ. City Center is a gigantic resort and casino project currently under construction on 67 acres in Las Vegas. City Center has hired Dewey & LeBoeuf to prepare itself for a possible bankruptcy filing and the law firm of Weil, Gotshal & Manges LLP is working for MGM Mirage on a range of legal issues.

The Journal reported a filing could come this weekend, depending on talks among MGM Mirage, its lenders and Dubai World. There is a slight possibility that any filing for court-protection could be averted if the talks this weekend lead to an agreement.

Dubai World, which is a conglomerate owned by the government of Dubai, has sued MGM Mirage for breach of contract and blamed it for expensive overruns. It's likely that it won't provide its half of the debt payment. To make up for Dubai World's share of the money, MGM Mirage is trying to persuade its lenders to allow it to solely fund the project. While talks between MGM Mirage and Dubai World were ongoing last night, there "may be no choice" but for City Center to file bankruptcy "if Dubai World doesn't fund," reported the Journal.

MGM Mirage has suffered in this bad economic environment as it has more than $13 billion in debt obligations and with casino revenue down, meeting those debt payments has only become more difficult.

The City Center project could potentially continue under bankruptcy-court protection, once the two sides agree on how to fund the project.

UPDATE: Shares of MGM are tumbling on the news. The stock is currently down 12% to $2.72.

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