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MGM Mirage Gets Waiver to Avoid Loan Default

MGM Mirage says it has received a waiver from lenders on its $7 billion senior credit facility to avoid defaulting on loans.

The gaming giant on Tuesday filed its delayed annual report, revealing an earnings loss of $3.06 per share for 2008, down from a profit of $4.88 a share the year before.

Earnings for the fourth quarter plunged to a loss of $4.15 a share from a $2.85 profit a year ago.

The company, which has been the subject of bankruptcy rumors in recent days, says that it did not believe it would be in compliance with its lenders as of March 31, and has negotiated a waiver from compliance through May 15.

As part of that agreement, the company repaid its senior credit facility $300 million, money it cannot reborrow without the consent of lenders.

In addition, "We are prohibited from prepaying or repurchasing our outstanding long-term debt or disposing of material assets," the filing says.

The interest rate on its current borrowings has been raised a full percentage point, and there are limits to how much money MGM Mirage can contribute to completing its massive joint venture with Dubai World, the CityCenter project on the Las Vegas Strip.

When the waiver expires May 15, the company says that if it is still out of compliance with lenders. Those creditors can—by a majority vote—move to demand immediate repayment of all outstanding money or terminate commitments to lend any more funds.

"The conditions and events described above raise a substantial doubt about our ability to continue as a going concern," the report says.

MGM Mirage says it is working to obtain additional waivers and amendments before the May 15 waiver expires.

It has also retained the services of advisers to explore the possibility of disposing of assets, raising additional debt and/or equity capital, and modifying or extending its long-term debt.

"However, there can be no assurance that we will be successful in achieving our objectives," the company said.

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