MGM Has An Offer For Borgata
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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