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MGM Has An Offer For Borgata

By Chuckmonster on Tuesday, 12th October 2010 2:49pm
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MGM Resorts International released preliminary third quarter results today, which contains some tidbits about their planned sale of Borgata.

The Company recently received an offer for its 50% economic interest in the Borgata Hotel Casino & Spa ("Borgata") based on an enterprise value of $1.35 billion for the entire asset. The Company's Board of Directors has authorized submission of this offer to Boyd Gaming Corporation, which owns the other 50% interest, in accordance with the right of first refusal provisions included in the joint venture agreement. Based on Borgata's September debt balances, the offer equates to slightly in excess of $250 million for the Company's 50% interest. This is less than the carrying value of the Company's investment in Borgata; therefore, the Company will record a pre-tax impairment charge of approximately $128 million in the third quarter of 2010. The consummation of any such transaction as a result of the offer is subject to negotiation of final documents, due diligence, and regulatory approval.

So the "enterprise value" of Borgata is $1.35B. The offer for 50% is a $250M, which values the "enterprise" at $500M, giving MGM the ability to simply write off $128M in "impairment" losses.

Jim and Bill, own a bike which the bike blue book says is worth $13. George offered Jim's half of the bike for $2.50, less than 1/4 of the bike's fair value. Jim takes the $2.50 for his portion of the bike and writes off the loss as "whatever" and moves to Macau.


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