Wednesday, March 25, 2009

Breaking: Ruffin May Pay MGM The Whole $775m

Yesterday, I interviewed Phil Ruffin for a New York Times piece we later decided not to write about the minor tempest over phone calls Sens. Reid and Ensign made to "encourage" major banks to lend $1.2 billion to MGM Mirage for the completion of CityCenter.

I was interested in Ruffin's take as a fellow in the process of buying the Treasure Island off MGM Mirage. He was supportive of Reid and Ensign's efforts to help MGM. "I wouldn't jump all over them," Ruffin said. "That's exactly what your senators are supposed to do." In fact, one reason the Times lost enthusiasm for the story was that Ensign cleared making these calls with the Senate Ethics Committee and other breaking news took precedence.

But in the discussion, I asked Ruffin about the revelation last week that he was having difficulty finding outside financing $175 million of the $775 million purchase price of the TI. He's putting $600 million in cash into the deal and MGM Mirage even offered him a $20 million discount if he could get outside financing so they could just have all the money now.

Ruffin: Isn't that the craziest thing? We’re putting up $600 million and they’re asking for the moon for the banks to put up $175 million. You ‘d think with that kind of equity, it wouldn't be necessary.

VegasHappensHere: Well, if you're having that kind of trouble on a relatively small loan, who could possibly buy any assets from MGM Mirage or Harrah's even if they were selling them?

Ruffin: It would be impossible unless you’re sitting on a lot of cash. The banks are too leery, they’re jumpy about Las Vegas.

VegasHappensHere: So would you just pay the whole $775 million in cash if they asked you to?
Ruffin: Yeah, I would. I would. If it would help them out, I might just do that.

Also, Ruffin said that in retrospect the decision to build CityCenter and put so much on that 67-acre property was clearly "a mistake. I like 'em. These are friends of mine. I think Jim Murren is a class act and Kirk Kerkorian is a friend. At the time when they started this project, condos were going like crazy and MGM had a very good retail set-up, the kiosks in all their hotels and so forth. Trump and I did the same thing and we had contracts on all 1,200 units. The markets cratered and only 30 percent have closed. The same thing happened in spades to them. But I think if you asked them now, they would say it was a mistake."

Somehow I'm doubting that. At least not now. Maybe in a decade when it all blows over.

Meanwhile, it's also worth noting that I called Harrah's senior vice president Jan Jones for her take on the Reid/Ensign phone calls. She said Harrah's has not asked the senators to intervene for loans but that they also aren't building anything and don't need the capital. But Jones agreed with Ruffin that Reid/Ensign "were just speaking out in favor of the biggest industry in the state. They weren’t asking for any special favors."

Jones also expressed frustration that certain anti-Obama forces want to vilify anyone trying to help out the gaming business. She makes this interesting point:

"It’s become in vogue to bash big business and it's always ben in vogue to bash the gaming industry," she said. "I don’t think they're thinking from the policy perspective. They’re thinking in soundbites. For some reason the word casino – probably mostly thanks to Hollywood's depictions of it – has a negative connoation, but when you really look at the direct and indirect employment numbers for this industry, they're much bigger than the auto industry. This is working class America."


thomas said...

I am just in awe of Phil Ruffin. He is just the person to bring Las Vegas back to glory. He is a living example that in good times or hard economic times, if you are prepared and work hard you can be a success regardless of the economic climate. I am a loyal Mirage guest, but I have to say, I am tempted to go to the TI next time just to give my man some support!

Anonymous said...

Also the casino industry probably gets a bad rap because it's essentially a business built to fleece suckers from their cash. You can dress it up any way you want, add a spa, nightclub and pool, fine dining and nice rooms, but at their heart, these places are no different from the saloons in Deadwood, their proprietors MBAs (real and imagined) notwithstanding.