MGM MIRAGE (NYSE: MGM) today announced that it has entered into a settlement agreement with the New Jersey Division of Gaming Enforcement (DGE) under which it will sell its 50% ownership interest in the Borgata Hotel Casino & Spa and related leased land in Atlantic City.
The settlement is subject to approval by the New Jersey Casino Control Commission (CCC). If approved, MGM MIRAGE will cease doing business as a gaming licensee in New Jersey.
As MGM MIRAGE previously announced, the DGE has recommended to the CCC that MGM MIRAGE’s joint venture partner in Macau be found unsuitable and the Company be directed to disengage itself from any business association with this partner.
“We have the utmost respect for the DGE but disagree with its assessment of our partner in Macau,” said Jim Murren, Chairman and Chief Executive Officer. “Regulators in other jurisdictions in which we operate casinos have thoroughly considered this matter and all of them have either determined that the relationship is appropriate or have decided that further action is not necessary. Since the DGE takes a different view, we believe that the best course of action for our company and its shareholders is to settle this matter and move forward with the compelling growth opportunities we have in Macau.”
The Casino Control Commission is expected to hold a hearing on the settlement on March 17, 2010.
Under the terms of the settlement, the company will place its interest in the Borgata and related leased land in a divestiture trust. The settlement mandates the sale of the trust property within a 30-month period. During the first 18 months, MGM MIRAGE will have the right to direct the trustee to sell the trust property, subject to approval of the CCC. If a sale is not concluded by that time, the trustee will be responsible for selling MGM MIRAGE’s interest in the Borgata and related leased land during the following 12-month period.
Prior to the consummation of the sale, the divestiture trust will retain any cash flows received in respect of the assets in trust, but will pay property taxes and other costs attributable to the trust property to the extent that minimum trust cash balances are maintained.
MGM MIRAGE will be the sole economic beneficiary of the trust. The company will be permitted to reapply for a New Jersey gaming license beginning 30 months after the completion of the sale.
MGM MIRAGE owns the Borgata through a 50-50 joint venture with Boyd Gaming Corporation whose interest is not affected by the settlement. “The Borgata is the most successful property in the Atlantic City marketplace, and we expect there will be strong interest in this valuable asset,” said Murren.