A long-simmering controversy over MGM Mirage's (MGM) choice of development partners is just one in a long line of setbacks that has the company teetering on the edge of losing its entire stack of chips.

The latest blow was a report by the New Jersey Division of Gaming Enforcement concluding that gambling mogul Pansy Ho was an "unsuitable" partner in partner in MGM MIrage's intended development for Macau. Ho, the daughter of Macau's onetime capo Stanley Ho, suffers a shady family reputation that led Singapore to refuse the family any role in its $5 billion development on Macau's Sentosa Island. (Luckily for the Hos, that development is turning into a world-class disaster.)

MGM Mirage had just dodged another bullet. Having reached an impasse with partner Dubai World over financing of the $8.5 billion CityCenter in that Middle Eastern metropolis, the project threatened to take the company down with it. But as MGM Mirage leveraged some of its remaining unleveraged properties to restructure its senior credit facility, Dubai World relented. MGM also raised $1 billion via a public stock offering of 143 million shares, which it will use to pay down some of its $14 billion in debt.

On the bright side, a branch of the company, MGM Mirage Hospitality, just announced agreements with developers in several countries to build luxury hotels (without casinos) under MGM's most alluring brands, Bellagio and MGM Grand. MGM will manage the properties and provide the prestige; the development costs will be borne by the partners.

But with $14 billion outstanding, MGM Mirage depends on its table stakes -- and the news from Vegas is grim. Visitors in March were down 6.5% over 2008, and convention traffic was off by 30%. Worse, the average daily room rate was down 31.6%, from $135.11 to $92.46. And Macau continues to disappoint, as China's casinos -- which draw a large percentage of traffic from day-trippers from Hong Kong and southern China, rather than overnight guests -- continue to suffer under travel restrictions.

MGM Mirage appears to have trimmed maintenance capital spending by $500 million per year over the past three years, Dow Jones analyst Sameer Bhatia reported recently: a troubling matter that could burn investors. Bhatia expects that the company will soon need to seek new financing to support its ongoing debt load.

With MGM Mirage and Las Vegas Sands both in perilous shape, the odds shrink daily that both will be around by this time next year. And then who will run the Bellagio's "dancing waters" fountain?

See more iconic American companies on the brink.


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