美高梅國際酒店集團 (MGM) 2009 Q1 法說會逐字稿

Good afternoon, and welcome to the MGM Mirage first quarter conference call.

Joining the call from the Company today are Jim Murren, Chairman and Chief Executive Officer; Bobby Baldwin, Chief Design and Construction Officer of MGM Mirage and President and CEO of CityCenter; Dan D'Arrigo, Executive Vice President and Chief Financial Officer; Aldo Manzini, Executive Vice President and Chief Administrative Officer; Bob Selwood, Executive Vice President and Chief Accounting Officer.

Participants are in a listen-only mode.

After the Company's remarks there will be a question-and-answer session.

Now, I would like to turn the call over to Mr.

Dan D'Arrigo.

Thank you, and good afternoon, everyone.

Welcome to our first quarter earnings call.

This call is being broadcast live on the Internet at www.mgmmirage.com and at www.companyboardroom.com.

A replay of the call will be available on the Company's website.

A little bit ago, we furnished our press release on the Form 10-K to the SEC.

Additional information was posted on our website which gives significant detail behind the numbers included in the release.

Before we get started, I would like to just read our Safe Harbor.

Information we present on this call may contain forward-looking statements as defined by the SEC.

Such forward-looking statements are protected by the Safe Harbor amendments of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from estimates.

Listeners should also refer to the disclosures about risks and uncertainties made in our filings with the SEC.

Now, I would like to turn it over to Mr.

Jim Murren.

Thank you, Dan.

And good afternoon, everyone.

Last week, we announced two major events which are integral to the continued operation of our Company and ultimately lead to a larger solution for our capital structure.

Beside the information we give you on the call we will be filing on Forms 8-K more information on both of these transactions.

I encourage you to look at Form 8-Ks as well as listen to us today.

First first event is we with Dubai World and the support of our CityCenter lenders announced a comprehensive plan for the financing and completion of CityCenter.

This agreement provides stability for the thousands of construction workers on site.

And hope for those seeking one of the 10,000 permitted jobs that will be created as a result of CityCenter.

I must say I am incredibly proud of our team here at MGM Mirage from Dan and the finance group, legal, Bobby and his team, for the efforts to bring us to this satisfactory conclusion last week.

Second, we announce an amendment to our corporate senior credit facility.

The ability to reach this amendment with our lenders I think demonstrates the continued support of our lenders and our shared desire for the completion the CityCenter project.

We and our lenders and our partners have agreed it is absolutely essential to complete CityCenter to ensure value creation for all the stakeholders and now that goal will be achieved.

We remain focused on continuing to work with our lenders and advisors to reach a long term solution for the Company's financial capital structure.

Our issues are very complex and our challenges are great.

But these discussions continue to remain positive and constructive.

We have a lot of smart people working on this.

They are talented and resolute.

And I know that with them will come to a finalized plan that will position the Company for long term success.

Let me touch on a few key points in the CityCenter agreement.

On the agreement we and Dubai World funded our remaining equity contributions and CityCenter also the lenders funded their full $1.8 billion.

So in Las Vegas terms, the money we are all in.

Dubai's contributions include the $135 million that we previously funded on their behalf and in addition Dubai World dismissed its lawsuit that they had filed against us.

Also as part of this agreement, we at MGM Mirage are responsible for the completion costs to the extent that they exceed the current $8.5 billion budget and until that project is completed our completion guarantee will be secured by the assets of Circus Circus, Las Vegas and some adjacent land.

And Bobby will give you update as to where we stand on the construction and its cost.

And Dan will also talk about the amendment to our senior credit facility when he speak in a few moments.

We had two major events last week.

We are very proud of the accomplishments of those two.

Let me turn our attention here to operations and current market conditions.

First, let talk about Las Vegas, the Las Vegas market.

In the first quarter, it was clearly challenging for all Las Vegas operators.

In fact, it was quite brutal early in the quarter.

We are not immune to these overall conditions but we firmly believe that we continue to we pick up market share throughout the quarter and I think that's based on the quality of our people and our resorts.

Our resorts were impacted in different ways depending on the market segment.

The high end held up actually quite well on the gaming side.

But all of our resorts, in particular Mandalay Bay and MGM Grand suffered from a loss of citywide convention business, which of course, puts pressure on room rates and occupancy.

In fact, according to the LVCA Citywide convention attendance was down 29% in the period of December of last year through February of this year.

And that has an impact on the city and on our properties at MGM Mirage.

Additionally, our properties had to react to the pressure on rates.

When convention business falls away, we have to change our mix and we have to adapt it with some type of response.

As we have discussed, property EBITDA is very, very sensitive to room rates so the revenue impacts that we saw flowed right through, very heavily to our bottom line in the first quarter.

However, we have seen the pace of convention cancellations slow down from those significant cancellations we had December, January, February.

We believe that our attrition rates will be though still higher in '09 due to the instability of the convention market, they have improved significantly.

We believe that extraordinary attrition that we've experienced earlier this year will not be the norm.

2009 will be down for MGM Mirage and the convention segment versus 2008 probably to the tune of over 25%.

But we have seen improvements in that business in more recent periods.

Occupancy rates began to turn around in March.

The occupant's percentage was just under 95% that month and here back in April, this past April our occupancy was actually 97%.

So in March we were 95%.

April we were 97%.

That by the way was flat with April of '08.

For the first time in awhile we had occupancy rates that were not down year-over-year.

This trend if it continues will allow us to yield our rooms obviously better at higher rates over time.

We continue to see a significant increase in transient and leisure bookings.

And the strong promotional activity that we have used before.

Combined with our world class shows and our amenities are driving forward bookings nicely.

Room rates will remain lower than the prior year but we look for that trend also to continue as we get into the back half of 2009.

As has been the case with our Company world class events allow us to drive significant volume and the event calendar has been quite strong and will remain strong in the second and third quarters.

We just had of course a popular Pacquiao/Hatton fight this past weekend, one of the largest gates we have had in many many years.

We have a UC fight, many great concerts coming up and over at Mandalay, Lion King opens up in mid-May, which we are going to be, I think very happy to have.

Business volumes and customer activity and spend are improving and as they do we expect our margins will improve significantly as a result of the profit leverage that we talked about earlier and our focus on cost management, I think Dan's going to expect to see an improvement on our margins on a going forward basis.

So that's Las Vegas.

It's still tough.

It was brutal in the early part of the year.

It seems to be improving to a degree.

We're not out of the woods yet.

By any stretch in this market.

And we don't want to give false hope or expectations and we think we have seen the worse of what is happening here and we think w have the tools in place to see gradual improvement in '09.

And significant improvement in 2010.

Out in the regional markets, the story is all good.

Both in Detroit and Mississippi.

MGM Grand Detroit has over 40% market share in the market and had cash flows up 18% compared to the same quarter of the prior year.

In Mississippi, [George Korches] and the team are doing a great job, like Lorenzo is up in Detroit and Mississippi properties were up 15% year-over-year as Gold Strike Tunica and Beau Rivage did extraordinarily well.

Gold Strike Tunica, by the way, is on pace for its highest ever annual cash flow year this year.

Finally, for me, the topic is TI.

We closed on the sale of Treasure Island on March 20, of this year.

At that closing we received $600 million in cash from Phil Ruffin and $175 million secured note at an interest rate of 10%.

Just last week, Phil paid off that note.

We had negotiated a discount should he pay early and he did.

So last week, we received $155 million.

So, we are now paid in full for the transaction of TI.

And of course we wish Phil all the best with the beautiful property.

With that, I will turn it over to Dan to give an overview of the quarter and a further discussion of our liquidity and financial position.

Thank you, Jim.

As you see in the release, the release outlines various items that impacted our comparability for the first quarter this year.

Most prominently was the gain on the sale of Treasure Island and the final insurance income from the Monte Carlo fire last year.

Our whole percentage in the quarter was slightly lower compared to the prior year same quarter.

Both years were close to the high end of our stated range.

Our property EBITDA was down 38% quarter over quarter on a comparable basis with a margin of 24%.

Compared to 31% last year.

As Jim mentioned, the high end segment of the market continues to hold in there very well.

Our baccarat volume was down only 1% quarter over quarter.

Our nongaming revenues were hurt by the fallout in the convention business.

Our food and beverage revenues were down 16%.

And our entertainment revenues were down 12%.

Our results benefited from a decrease in our corporate expense.

$24 million compared to $32 million in the prior year's quarter despite higher legal and advisory costs as we continue to reduce corporate expense including lower incentive pay quarter over quarter.

In the first quarter of 2009 our gross interest expense was $240 million with capitalized interest of $68 million in the quarter.

For a net interest expense of $172 million, higher than the same in the prior year's quarters due to increased borrowings and our higher overall borrowing rate.

We continue to focus on developing further cost savings initiatives.

So far this year we have identified an additional $120 million in new cost savings initiatives.

Mostly related to payroll and procurement.

We are not done on the front and have many ongoing projects to increase our efficiencies.

We currently expect nearly $400 million of impact on the full year of 2009.

A large portion of which is sustainable into future periods.

As Jim mentioned, the leverage in the business is quite significant and a lot of these cost savings are permanent.

Now, I will turn it over to a discussion on our liquidity and financial position.

As we discussed in our release we obtained an additional amendment and waiver to our senior corporate credit facility through June 30, of 2009.

Previously as you recall our waiver period expired on May 15.

Under the terms of this amendment we were able to fund our remaining equity commitments to CityCenter through the issuance of our irrevocable letter of credit in the amount of $224 million.

The amendment also permits us to enter into the revised completion guarantees related to CityCenter.

In addition we repaid $100 million under our senior revolving credit facility.

This amount is not available for rebarring without the requisite lender approvals.

In addition, we have agreed with our lenders to secure interest in the assets of Gold Strike Tunica and certain undeveloped land on the Las Vegas strip subject to requisite approvals.

This secured debt under the facility is in an amount up to $300 million.

In addition, MGM Grand Detroit which is also a coborrower under the senior credit facility has agreed to grant the lenders a security interest in its assets to secure its borrowings under the facility subject to gaining and other approvals up to a maximum amount of $500 million.

We continue to work with our lenders and advisors to assist us in implementing plans to address our liquidity issues which may result in further waivers.

We are evaluating numerous possibilities.

Including raising additional debt and/or equity capital.

Modifying or extending our long-term debt.

And disposing potentially of certain assets.

We are considering all of our options and are committed to finding the best possible solution.

However, we can provide no assurance that we will be successful in achieving our objective given the fluidity of the situation and the variables involved.

As Jim mentioned, the CityCenter credit facility was also amended and I will provide a few details on that amendment.

That facility will now mature on June 30, 2012.

The interest margin increased by 2% or now LIBOR 575.

The 2% increase is to be paid in kind through September 30, 2010.

At which time all interest will be cash paid.

And there's additional margin increases through the term of this facility.

Conder proceeds of up to $250 million can be used to pay for construction costs.

And 30% of net Conder proceeds in excess of 250 will be applied to reduce outstanding borrowings under the credit facility.

With the remaining 70% available as distributable cash, upon CityCenter satisfying certain performance criteria.

The financial covenants were also modified to give CityCenter greater flexibility during its first 18 months of operation.

There is basically an 18 month holiday in any financial covenants.

And all cost defaults were also eliminated under that facility.

Finally, on our financial position, you will note in our release that we have reclassified all of our borrowings as current liabilities.

All of our long-term debt borrowings.

This is an accounting requirement given we're in this bank waiver process.

And will not impact our operations or our ability to execute transactions to improve our liquidity.

Now to help you along with some of your modeling we will provide details on our current forecast for the second quarter of 2009.

We expect total stock compensation will be approximately $11 million in the second quarter.

Our corporate expense is estimated to be in a range of 35 million to $40 million.

Which includes approximately $3 million of stock compensation expense and also includes a higher level of cost for legal, consulting, and advisory services related to our restructuring efforts.

Our preopening expense should be consistent with the first quarter.

Primarily consisting of expenses related to our share of the CityCenter preopening.

The depreciation is estimated to be in a range of 175 million to $180 million for the quarter.

We estimate gross interest expense to be approximately 245 million to $250 in the quarter with capitalized interest in the range of 60 million to $65 million.

We reiterate our guidance for CapEx for the year of approximately $200 million.

It may actually come in, inside of that.

But efforts are underway to continue to maintain our stringent efforts in relations to continuing our CapEx.

Now, I will hand it over to Bobby to provide an update on CityCenter.

Thank you, Dan.

Good afternoon.

CityCenter construction is on track as planned.

There are currently five tower cranes on the site and approximately 9,000 men and woman actively involved in the construction at CityCenter.

We expect to add another 500 workers or so over the next one or two months as the project peaks in terms of its employment.

The CityCenter's opening is on schedule and will be phased as follows.

Vidara opens October 1, of this year followed by Mandarin, Veer Towers and Crystals on December 3, and Aria Resort and Casino finally on December the 16th of 2009.

To date CityCenter has received over 111,000 employment applications of which 94,000 or about 85% have been external applicants.

17,000 or about 15% are current MGM Mirage employees currently here in Las Vegas.

We have conducted 56,000 human resources reviews.

And conducted 21,000 departmental interviews already for CityCenter.

In regards to Aria to date over 105,000 room nights have been booked and no cancellations have occurred.

over 35,000 room nights have been for convention groups which is about a 59% increase over what Bellagio had booked eight months prior to its opening.

Within 48 hours of announcing funding resolution for CityCenter, we received new leads for 5,000 or 6,000 room nights.

And we expect that to increase.

We have also booked over 54,000 room nights at Vidara to date.

And finally, regarding Cirque du Soleil training for the show officially began April 6, in Montreal, Canada.

Cirque du Soleil has identified all the cast members, dancers, acrobats, musicians and the like representing 12 different countries.

CDS will start load in of the stage in back of the house at the end of this month.

It is the first part of CityCenter and in particular Aria to be occupied.

The show is scheduled to open along with Aria property opening December 16, with two shows performing nightly and performing five nights a week.

As it relates to the construction budget, we are in our final stages, we have about seven months to go to completion.

Everybody currently is working off an estimated cost to complete.

That amount of money is $8.486 billion.

to be exact.

That's the number that is used in the bank agreement.

That's the number used in all the paperwork between Dubai, MGM Mirage and our bank group.

We have expended $6.024 billion to date.

Therefore we have $2.452 billion to complete CityCenter.

$632 million of that is in the form of additional sponsor equity.

Currently, there is $1.586 billion remaining to be drawn on the bank lines.

And as Dan pointed out $244 million.

in the form of the completion guarantee.

That's what totals $2.462 billion to go.

So, the project, we spent about $6 billion.

We have about $2.5 billion to go to complete the $8.5 billion roughly, CityCenter in its entirety.

That's my report, Dan.

Or Jim.

Thank you, Bobby.

Operator, at this time we have about a full 30 minutes to open up for questions and answers.

(Operator Instructions) This comes from Felicia Hendrix of Barclays Capital.

Just a few questions.

One is just the forward booking.

The improving forward booking pace that you were talking about, Jim, I'm wondering if you are still seeing the prior trends that you have discussed in the past where you see increased volumes during times when there are events.

But a slowdown during times when there are no events or has that also improved?

The weekends are consistently solid now Felicia.

Even when we don't have a major event we are able to occupy the building at a very healthy level.

The mid week is still very volatile although that is picking up a little bit too isn't it.

And our issue has not been on occupancy lately.

It was earlier in the year and certainly late last year.

The issue is trying to yield the rooms in a little bit more profitable fashion.

So we have seen on the margin improvement.

Certainly on the weekends where we are able to occupy the buildings very fully on the weekends.

And now we are starting to see a little improvement on the midweek segment.

And in both cases we need to get rates up to really get decent RevPAR comparisons.

But we are on our way, I think.

That actually gets to my next question.

When you were talking about the improved occupancy rates you saw in April.

Can you tell us what type of ADR you were seeing in April versus, I don't know if you compared it sequentially or year-over-year.

REVPAR was down I think 34% in the first quarter.

REVPAR was down about 30% in April.

That's all from rate.

Our occupancy was flat basically year over year in April and our ADR was down about 30%.

Thanks.

Which is an improvement from the first quarter.

Right.

Just switching gears to the balance sheet.

I am wondering have you guys discussed or can you discuss with us now what your target balance sheet leverage is on a go forward basis?

What the sheet limp is.

Do you have any suggestions for us.

Less than where you are now.

Done.

Next question.

We haven't articulated that publicly at this point.

We clearly believe that this Company has too much debt today and that our leverage needs to be brought down significantly.

We are going to be working with our advisors, in fact, we have been.

And with a lot of the commercial banks that are major parts of our life.

I think it is safe to say that this Company or any gaming Company should really be under 6 times leveraged.

It is a matter of how you get there.

And when you get there.

But we have been higher.

And we have been lower and I think we like life better lower.

And then just, I know you are looking at all options, you've said that many times.

But I'm wondering if you are also open to sharing any equity or (inaudible)?

Literally everything is open to discussion and really, it should be at this point in time.

What we have done last week, which is why it is such a major milestone for us is that we not only solved CityCenter which was so critical to the value proposition of MGM Mirage and to Dubai World and to the people working on CityCenter and the community in general.

But it gives us a significant amount of time.

More than ample time to figure out the riddle of MGM Mirage's situation.

And it would be a mistake of our Company to discount any option at this point in time.

I can tell you that we are in a very good position relative to where companies could find themselves at this point in the cycle.

We have all unsecured debt.

With the reception of the New York, New York bond.

And expiration.

We have a very large and loyal following amongst the commercial bank community.

We have made money for people in many years past and we have a cadre of investors that want to see us succeed.

And yet, we are in the middle of a deep recession and still a financial crisis.

And so, it is not without a significant amount of risk.

But if we were to take any one of those options off the table right now we would be limiting ourselves and this is a time to maximize your optionality.

And we have the time to do that now.

Great.

One last test housekeeping question and then I'll go, your interest expense was higher than your guidance.

Was that because of the additional CityCenter funding or was that because was CapEx was different than what your guidance was?

Felicia, this is Dan.

We had a couple things, we pulled the full revolver earlier in the quarter.

And that was resulted in higher interest, gross interest.

And a little bit less in terms of what we were anticipating on the capital side.

We also have an accounting issue to deal with on our equity investment in CityCenter where it actually bumps up our gross interest expense and gives us higher capitalized interest as well.

So it nets out on a net interest basis.

Thanks, guys.

Your next question comes from Joe Greff with JPMorgan.

Can you hear me okay.

Can hear you great, Joe.

Great.

Jim, one question on the Las Vegas Strip in the quarter on the margin side.

Was there a material difference in the EBITDA margins in March versus January in terms of operating, And getting used to the revenues generated, from the hotels there.

And as you look at April and the RevPAR being 400 basis points there than what you saw in the first quarter can you still -- are you able to extract much in the way of margin improvement even if RevPAR is only improving 400 basis points sequentially?

Well, our margins did improve.

We are looking for the numbers specifically.

I don't have it.

Do you have it, Dan?

They improved steadily throughout the quarter.

January being the lowest.

Little over 20% and it rose throughout the first quarter.

February and March.

March being the highest obviously.

And a lot has to do with the cost savings.

The plans that we have under way right now.

But also we're starting to yield a little bit better.

So that's why we're trying to suggest that if we can keep our costs at our current levels or close to them.

And we are able to get better room rate increases I think you should see -- we would be disappointed if we did not see an improvement in our margins.

They improved throughout the first quarter: They improved in April.

And I think that we should see that as our revenues start coming back.

I missed the second part of your question, Joe.

You actually answered it, Jim.

I will leave it open ended and you can discuss it how you like, Jim, but maybe give us an update in terms of interest in Detroit and the two Mississippi assets and where that stands from a time line perspective?

Yes.

There's been a lot of rumor and speculation as to what we may sell.

And it centers around a few of the strip assets, certainly about Detroit an Mississippi.

And it is one of the occupational hazards of being in this business, in a transaction oriented business.

And it is disruptive to the employees.

And we are sad for that.

I can tell you that we do respond to unsolicited inquiry.

In fact, we have done it throughout my career here, we sold and bought many things.

And we will continue to do that on a going forward basis.

There is an extremely high level of interest for many of our MGM assets.

Including Detroit and Mississippi.

As I have said before, it is important to reiterate, asset sales, if they occur in the future, are not going to be the driver of this restructuring, they are a part of the puzzle.

And just like Treasure Island was ultimately now part of the puzzle.

And when Mr.

Ruftin approached us we negotiated as fairly as we could and I think the result was a transaction that both sides feel good about.

And certainly, from our perspective helps us in our global restructuring.

And I would say that that is what I would think on a going forward basis.

I could assure you that there are going to be no fire sales here.

we are not holding a tag sale for any property.

Our properties are what they are, we know what they are.

They are the best their breed in every market in which they operate.

We have the best people running them.

And if we sell any asset it will be because we got a full price for the conditions of the market in which we operate today and it is because it is in the contest of an overall restructuring.

And I can tell you that the interest in properties that we own is extremely high.

Good enough.

Thanks, Jim.

Your next question comes from Robin Farley with UBS.

Great.

Thanks.

Couple of questions.

First, can you talk about how far out the cancellations are?

In other words, when will the impact of those cancellations start to lesssen?

Are there still canceled conventions six months out from now?

And then also, your baccarat volume held up better than anyone had expected.

Was that event driven or can you give us color on that?

First on the convention side we're going to be down about 30% this year versus last year, Robin, on a year to year basis.

With much of that happening in the first half of the year.

We saw -- in terms of what we are going to see in the second half of the year there is going to be some improvement to it.

I'm looking at -- Corey is showing me some numbers now, and clearly, in the second half of this year even we are projecting an improvement as it relates sequentially versus the first half.

And we do think that convention bookings and convention business for MGM Mirage will be up in 2010 versus this year.

We haven't been a really good forecaster of convention business because we have gotten -- in the past, say year and a half or so because we've gotten very close up cancellations.

We saw attrition rates ties over 50% last fall, right?

It was really unbelievable.

And we are down into the 20s right now.

Our normal attrition rate is about 13.

So we are still significantly above what we would normally experience in terms of fall out of convention business.

It makes it harder to predict.

But we will be down year over year for the whole year, down about 30% is what our guess is.

Improving as we go out through the year.

Because the booking pace books a little bit more solid and the attrition rates we are projecting to be no worse than they are right now.

Which is a lot better than they were late last year.

As relates to the baccarat business, high end in general, we didn't have anything special that I recall, Bobby.

Do you remember?

No.

We didn't have anything particularly in line.

We do now though.

We had and baccarat tournament this past weekend at the MGM and it actually carried over to many of the properties and we have another high end event this coming weekend with a [Al Facento] and a golf tournament.

Al runs international marketing for us.

The high end has held up consistently well and we think we'er holding our own on market share.

It's not picking up a little bit.

And that has been a better story than the nonbaccarat table business.

Which continues to be down double digits year over year.

That is helpful.

And then just lastly, can you share your Macau EBITDA with us?

Macau EBITDA for the quarter was roughly $16 million.

1-6 in the quarter.

Great.

Thank you.

Your next question comes from Larry Klatzkin with Jefferies.

Hey guys.

Nice improvement in the margins.

Free cash rate, you ended the quarter with $1.4 billion.

You had to pay down a bank debt (inaudible).

You have the $400 million from March 31, more to put in.

You have some taxes to pay on the TI.

You're getting $100 million back from the buy out.

I work it out (inaudible) free cash of about 700 million, $800 million?

After the transactions with CityCenter and where we stand today, Larry, we have about $1.1 billion in total cash on hand including what is needed for our cages.

So cage is what, less than $200 million.

I would say roughly plus or minus.

Depends on the event in the quarter.

And plus or minus around 300.

Okay.

So about $800 million free cash.

Okay.

And is there any way you can guys can see more cost cuts or this is about it?

Well, we're so close to the finish line there could be additional cost savings as we settle out the project.

But this is pretty much the baseline that we are working off of.

There may be some money in the very end of the closeout process but we don't know.

This is probably pretty close to the estimated cost to complete.

Then the apartment sales.

How are they looking.

You have to do 244 (inaudible) to have to do the completion guarantee.

And how much more could you do.

What are you expecting.

You mean in terms of closings as opposed to sale.

Sales are quiet.

As you know.

And we have about $312 million in current deposits.

Against the contracts that are in place.

We have to close the total of $560 million to cover the deposits and the completion guarantee.

And then actually it is $556 million; is that correct?

Then, we think we can do much much better than that.

But we are going to wait until this summer or mid-summer to really finalize our plan.

We do see a great deal of interest in, as it relates to our buyers particularly in the last week or 10 days.

They were kind of a little nervous about where we were two weeks ago.

And a lot of people have called, a lot of people have very much interest in closing our units and we will have complete profiles on each of our buyers by mid-summer.

Now, you guys sold a block to a high end hotel group.

Is that true for over $200 million?

No.

It was about 70 -- 78 apartments for $59 million.

Okay.

Sorry about that.

Wrong number.

And as far as the CityCenter opening up, what do you, what do you guys see the effect on the other facilities.

It is going to be dilutive?

Obviously, Jim, you think this is positive for the whole Company can you just give us the outlook of how you think the effect will be in the whole Company and where it goes?

I think the effect, particularly regionally is going to be very powerful.

Not only just for CityCenter and in particular, for Monte Carlo and Bellagio because they have liked their connection to one another for almost four years.

We have, as you know, $150 million people mover system that connects Bellagio with CityCenter and finally terminates at Monte Carlo.

That is also going to help to energize New York, New York.

Monte Carlo in particular and New York, New York to a lesser extent have been embroiled in this construction location for almost 48 months.

I think getting the neighborhood cleaned up.

Everything finished, all the roads finished.

Particularly Sinatra which is to the west.

And the new Harmon avenue tat will connect east and west Las Vegas through CityCenter.

these are very important things to the neighborhood casinos that we own and others in the neighborhood.

So we think it is going to be quite positive.

Particularly for Monte Carlo and Bellagio.

All right.

Thank you very much, guys.

Your next question comes from David Katz with Oppenheimer.

Hi, afternoon.

Couple of questions.

Back from one of Bobby's details about $632 million I believe is the number that is left on CityCenter?

Could you give us some help breaking out when that equity investment is going to be spent over the quarters.

I assume it is over the next three quarters or maybe even some of it carries into early next year?

Well, as I said, we spent $6 billion to date.

There's about $2.5 billion yet to spend.

Right.

And the funding of the $2.5 billion is $632 million from the sponsors.

That is in this joint account with the bank's money.

And the undrawn bank's money is $1.586 billion.

Then about $250 in the completion proceeds.

Or completion guarantee that we expect to pay with condo proceeds.

That equals the $2.5 billion yet to spend.

Now, you want to know the timing of the spend?

Yes, please.

Okay.

In May.

It is about $350 million.

About $300 million in June.

Dropping to $250 million in July, August and September.

And then it it averages about $250 million in October, November.

And it peaks around $300 million in December.

Is that the total project?

There is a $216 million tail in 2010 and that's mostly the completion guarantee portion.

David, just to point out.

The bank money now.

And the sponsor equity is all pro rata from here on out.

All the money is getting spent pro rata across this timetable.

And both equity sponsors have their letters of credit out.

So there is no more funding going in.

Perfect.

And then if we could talk a little more about CityCenter.

And I guess I will speak for myself.

We spent a lot of time focusing on the spending and how it is going to be paid and allocated and all of that.

And a lot less time talking about its opening.

And how you expect that to go.

And what your strategies are.

And the expected impact if any, on the rest of the portfolio.

And just helping us set our expectations for the rest of the year and into next year.

Well, you are right about that.

Normally at this time months out from opening any project.

let alone a project of this spectacular scale and significance we would be celebrating every element of CityCenter.

And talking about the components of it, talking about how to integrate with the rest of the portfolio.

Give tours of the property.

Get the excitement going.

And of course, we have been able to do none of that.

We have been wrestling with capital markets.

We've been resolving our issues with the banks and our partners.

And you are right.

It has been devoid of information as to how CityCenter will be in terms of what it will do for our Company and our community.

That's going to be the focus of our communication, thankfully from now until when it opens.

And we will be able to give a mountain of information on our next quarter conference call and on conferences and conventions that we are invited to speak at.

We can't wait to explore that.

The preliminary message is that as Bobby said, instead of sitting next to an employee parking lot or the Boardwalk casino hotel or a construction site there will be 18 million square feet of the state of the art development in the United States right here in Las Vegas.

With world class architecture, world class art, state of the art rooms, public spaces, retail, the best possible tenants and restaurants.

The highest quality rooms and spas world class entertainment with Cirque du Soleil.

That has got to be positive for our community here in Las Vegas and for the neighborhood, and of course, we own most of the neighborhoods.

So that's good for us.

From the standpoint of how it interacts.

We hired the important people, the people running the property, that are going to be hiring the even more important people, the men and women that are going to be running the property.

And as Bobby said we have no lack of applicants in terms of energizing the buildings.

But we have our management team in place.

We have our marketing team in place.

We are very mindful of the fact that in the past in certain circumstances when high end properties have opened up it has been to the detriment of other properties in the portfolio.

We have been working for four years to avoid that.

And to make CityCenter and specifically Aria additive to the high end for MGM Mirage.

Additive to our market share in general and complementary to our existing portfolio.

We have designed CityCenter in a fashion that does not compete directly against the other properties.

We are not adding significant gaming capacity to the market.

In fact, of all of CityCenter's complex, the casino footprint itself, Bob , is no bigger than Bellagio itself.

And yet the scale of CityCenter dwarfs Bellagio or anything else out here.

The intent is to complement, Not compete, with our portfolio, and frankly, the portfolio's of our competitors but also to centralize and focus people at the center of the strip.

I have to believe that instead of the disparate activity that we have right now and a lot construction up and down the Boardwalk, when CityCenter opens up and 18 million square feet of excitement opens in December.

You are going to see a tremendous visitation boost to our valley.

We think the visitation in Las Vegas is going to be up at least 5 or 6% next year.

And we think we are going to be largely responsible for it by the way.

We think a lot of that visitation will accrue to the benefit of MGM Mirage and to our property.

It has been a huge journey to get us from inception to where we are right now and it has been rocky lately.

Certainly on a going forward basis we look forward to giving more detailed information on the program.

The components of the program.

The operating forecast elements of it, and spreading the word.

I can tell you the people who have had the opportunity to go through CityCenter.

Largely people we have been begging to get money from but many others as well have been blown away by the quality and scale of what we are trying to accomplish here.

And they consistently have said that this is not your every day casino.

And something much, much different.

And we look forward to bringing you through

David, you are going to hear a lot more about CityCenter am and one of the benefits of all this hoorahing here in the last two months is that there is not anybody on the planet who doesn't know what CityCenter is.

For whatever reason.

And we have gotten a lot of ink and it's been a high profile project worldwide.

I think everybody is going to be very happy with the end result.

As developers we always talk about how wonderful our developments are.

But in the end, it is only the consumers point of view and what they think that counts.

We think they are going to be very pleased with CityCenter and all its components.

Between the mirage properties and Aria in particular.

You might note that we are adding 4,000 casino hotel rooms to our current Las Vegas portfolio at MGM Mirage.

We also just took 3,000 casino hotel rooms out of our portfolio with the Treasure Island sale.

On balance there's not much change.

One last quick one, if I may.

Just going back, Jim, to some of your comments about, I observe many companies using the words stability or stabilizing.

I want to make sure I am clear on what you mean by that.

Does that mean still down but down a lot less than what we saw.

Or does that mean flat.

I don't mean to be facetious about it.

Just looking at my model the rest of this year and into next year.

I want to be clear that I am hearing right.

No, it is a good point.

You got it right the first time.

We're still down but down less so.

And sequentially improving but we are definitely still down and expect to be down all year.

And I'm looking at April's DRO which you can't get.

But for the first time in I don't know how long we beat our internal forecast pretty nicely.

And we're still down but down less so than in the first quarter.

Thank you very much.

You're welcome.

Your next question comes from Dennis Forst with KeyBanc.

Good afternoon.

I wanted to get a clarification on a couple of items.

Dan, you had said in your commentary that there could be as much as $400 million of cost savings, a lot of it permanent savings.

Can you give us a couple examples of things that will be permanent savings?

I think when you look at some of the things we have done, Dennis, obviously, the unfortunate part of this is we have gotten more efficient on some of the back of the house functions that we take an advantage of or granted over the many years.

We have streamlined a lot of the back of the house functions.

We have taken a look at a lot of areas like IT and accounting and different areas.

We've consolidated a lot of functions.

And as we bring CityCenter on board there is not going to be an incremental new department added.

There may be a couple of bodies, but for the most part those shared service functions will be able to absorb that flack going forward.

So when we look at a lot of the cost savings we have had to take a pretty hard look at labor, at purchasing.

A lot of areas to focus in on.

The 400 represents that number that we are capturing for this year alone.

In terms of the cost savings we will achieve.

Through these various programs.

We started doing this in the latter part of 2007.

And continued through a few different programs last year and early this year.

So the $400 million means incremental from '08?

Correct.

Will there be incremental additional savings in 2010 from 2009?

It will be marginal.

We are starting to look to run as efficient as possible.

I think we have taken out quite a bit.

Probably as much as we are going to probably be able to do right now.

There may be a few marginal areas to pick up on and get a little bit more efficient but that's probably about the most we will do right now.

On your comment about the accounting for the CityCenter interest.

And that's why cap interest was higher.

How does that work?

I didn't think think that the CityCenter numbers went through your consolidated income statement.

It is just an accounting accrual through the income statement.

It has no net effect on net interest.

It's a presentation more so than anything.

So, where does the 68 million or 65 million of cap interest come from?

Other than CityCenter you don't have much going on.

That's predominantly most of it.

At CityCenter, our investment in CityCenter is most of all of our cap interest.

That will go away when CityCenter opens, and gross interest will come down?

No.

Gross interest won't come down but the cap interest will go away.

Correct.

Then lastly, Jim.

Wanted to ask you for a clarification too.

You were talking about how the weekends were becoming solid.

Mid week still volatile.

Issue is yielding better room rates and we got to get our room rates up.

How do you get the room rates up when demand is so low?

And all your competition is fighting for occupancy.

Well, the demand is very high now.

We ran 97% occupancy in April.

Is there a correlation between that and the low rate.

There was earlier in the year.

Remember in in January, we were only in the high 70s in occupancy and we were giving rooms away.

And in February occupancy rose with our rates fell flat.

March our occupancy rose again, our rate is about flat.

In April we started raising rates slightly and our occupancy rose anyway.

The key is to build your base.

Got to build up the convention business, which will be, as I said earlier down year over year.

But we can add convention and conference business and we will.

That's one element to it.

And by the way our competitors are doing the same.

Forward booking trends are improving.

Several of the hotels have raised their minimum rates as we have recently ourselves.

And so, you are seeing city wide some firming in ADR.

Good.

Is this a change of philosophy from making sure the rooms are filled to making sure that the customer in the room is a better quality?

No.

We have always taken the view, and I recall it very profoundly, we all did, after 9/11 but we took the view occupy the rooms then improve your mix.

In that order.

Don't be fixated on mix, room mix.

Get your occupancy to the best possible or optimum level and the gradually improve your mix.

And that's what we did starting in the fall of last year.

In September and October when business, here in town fell so dramatically.

We went into hyperdrive to get our occupancies up.

And we had to do that by sacrificing rate.

We've been doing that now for several months, our occupancies are now back to normal levels.

But now we have to gradually increase our ADR and the way you do that is improve your mix within our portfolio.

So that is the same philosophy we've had in the past.

And it's starting to work again.

Last question.

You have hired Evercore and they are working on some I guess global plan for the balance sheet.

Is that a question?

It is a statement to get me into my question.

When will that study be completed and when will we hear something about how you are going to play the balance sheet out?

Sure.

Well, I'll tackle that, Dan, you can jump in if you -- yes, we have hired Evercore, they are a fine firm and they have done a great job for us so far.

I feel like we're the full employment act for advisors.

We have a mountain of investment banks and legal vice that we are sifting through.

And of course, we have been an active user of capital markets over many many years so people know us quite well.

So I would say that -- I would call Evercore, probably the quarterback but there are a lot of people on the field.

Those people are working with us.

We are going to be working with them over the next few weeks.

Dan, the team and myself, Cathy and Rick and Bob and a lot of folks here, Shawn, will all be working toward a financial structure.

And I would bet over the next couple weeks we will get -- sift through all these different scenarios.

It is very interesting, Dennis, that we all understand the issue, we understand where the Company is.

We understand our maturities, our bank facility, our current levels of cash flows.

We can sensitize future cash flows and take economic views of Las Vegas and globally and otherwise.

But all the banks and ll the advisors have the same set of facts.

And they're coming up with many different solutions to the same problem.

And it is going to be our job to sift through these different options or solutions.

Come up with two or three of them that seem to make the most sense and we are going to deliver that to our Board at MGM Mirage.

And then once the Board opines on that we will make it public.

My guess is that will occur certainly well before, well before our June 30, deadline.

It could probably happen by the end of this month.

If not, early June at the latest.

I would stay tuned.

We are working quite hard on this.

The good news is that we have been working on this since January.

It's just been moving under the radar when CityCenter has obviously been front and center in the media.

We have been doing a lot of the leg work to get ourselves prepared to get to this stage which is triaging ideas that the investment bank and Evercore have.

Coming up with a couple solutions we think make the most sense for all constituents.

Delivering them to our Board and then to the public.

And I would say within the next three weeks or so you'll know.

Good.

Looking forward to that.

And looking forward to you folks moving on.

And worrying about operations and not the balance sheet.

Sounds like a pleasure, Dennis.

With that, I think that's our allotted time.

We are at the 3:00 hour.

As always, thank you for joining and as always we are available for any other follow-up questions you may have.

Thank you for your interest in MGM Mirage.

And we look forward to talking to you again in the future.

Ladies and gentlemen, this does conclude today's teleconference, you may now all disconnect.