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Dubai World, the sovereign wealth-backed investor and joint venture partner in MGM Mirage’s CityCenter development project, has sued the casino operator for breach of contract following the debt-strapped company’s disclosure earlier that it was at risk of defaulting on its loans.

The disclosure by the US company controlled by Kirk Kerkorian in early March, which also included a warning of a “substantial doubt about [MGM Mirage’s] ability to continue as a going concern” puts the $8.8bn luxury resort project in jeopardy, Dubai World said.

The current path of the project is simply unsustainable given our partner’s financial troubles,” Dubai World said in a statement announcing the suit.

The suit, filed in Delaware Chancery court, could compound MGM Mirage’s recent financial woes as the recession has left its gaming tables emptier, while frozen credit markets make refinancing any of its debt difficult.

Last week, the company reported fourth quarter revenue fell to $1.6bn from $1.9bn and a loss of $1.1bn from a profit of $872m a year ago.

The owner of some of the world’s best-known casinos, including Bellagio, MGM Grand and Mirage casinos in Las Vegas, faces $1.2bn of bonds that are due this year and another $1.2bn in 2010. It won an eleventh hour reprieve from lenders, giving it two months to raise cash from new debt, its controlling shareholder or asset sales.

Dubai World’s statement said that costs had been “significantly over budget despite downsizing certain of the facilities”. It said: “This has caused Infinity World to make capital contributions far in excess of the levels orig­inally estimated by MGM.”

Infinity World, a subsidiary of Dubai World, which invested $4.3bn in the project, filed the lawsuit.

By Dubai World’s recounting, MGM Mirage’s initial $7.5bn estimate on the cost of building CityCenter, the massive luxury resort, shopping mall and residential complex between the Bellagio and Monte Carlo resorts on the Las Vegas Strip, underestimated the cost by $1.3bn. MGM Mirage’s $1.8bn in financing fell far short of an anticipated $5bn financing package.

Felicia Hendrix, a Barclays analyst, said the legal action “raises questions about Dubai World and MGM’s long term relationship”, despite MGM Mirage management’s declarations last week that the relationship was “outstanding”.

Dubai World and MGM Mirage, of which it owns 9.4 per cent, have been close partners.

MGM Mirage declined to comment and Dubai World was not available for further comment.

http://www.ft.com/cms/s/0/ea7e6d6e-17ff ... fd2ac.html

What if is was just a smoke screen ?

What if the current source of funding from the capital was pre conditioned on "getting out" of the gambling business.

What if the stock component of the aquisition was done at between $82 & $95. WHere is the stock now $3.3 ?

MGM did actually raise enough to fund their part of the deal - did Dubai World ? Without recourse to borrowing. Hmmmmm

Come on people have a look at the bigger picture - this was another vanity investment gone sour

First to legal council claims the higher ground - careful might lose face


More details to follow

viking-warrior wrote:What if is was just a smoke screen ?

What if the current source of funding from the capital was pre conditioned on "getting out" of the gambling business.

What if the stock component of the aquisition was done at between $82 & $95. WHere is the stock now $3.3 ?

MGM did actually raise enough to fund their part of the deal - did Dubai World ? Without recourse to borrowing. Hmmmmm

Come on people have a look at the bigger picture - this was another vanity investment gone sour

First to legal council claims the higher ground - careful might lose face


More details to follow

Hmmm Interesting.

I'm still waiting for further details!

viking-warrior wrote:What if is was just a smoke screen ?

What if the current source of funding from the capital was pre conditioned on "getting out" of the gambling business.

What if the stock component of the aquisition was done at between $82 & $95. WHere is the stock now $3.3 ?

MGM did actually raise enough to fund their part of the deal - did Dubai World ? Without recourse to borrowing. Hmmmmm

Come on people have a look at the bigger picture - this was another vanity investment gone sour

First to legal council claims the higher ground - careful might lose face


More details to follow

I'm inclined to agree with you. Under Dubai World, they purchased the QEII, which is sitting in the water like a ghost ship, requiring ongoing maintenance; there is Leisurecorp ( sports and leisure industry, identifying, investing in, and managing premier sports and leisure assets); Limitless (global real estate developer), and then we have Nahkeel, a money loser if there ever was one and Istithmar, which has and is selling off some of its acquisitions (Barneys). The only two generating money is Drydocks World and DP World.

I am sure that the agreement between DW and MGM requires that one of them pay a huge amount of money in default penalties should the other pull out? Lawsuit? Money in the pocket? Both companies are strapped for money. But a lawsuit to line your pockets, come on.

Cash is so tight - to defer payment by three or four months alone would heavily benefit DW.

This lawsuit was never about winning or losing - it was about the deferral of payments, neither party can afford for the other to pull out or the project to fail, but if you are borrowing at the rates that DW are then not having to borrow $200MM for 4 months is the equivalent of $5MM + saved, you might have thought that cash could have been paid to clean the pools out on the Palm

Guess not.

Anyone else notice that the DW website got hacked today LMAO ! Some disgruntled ex employee probably having a giggle from Chennai.

As for more details - am working on it, but like all labors of love it takes time

Thanks for dangling that carrot - or was it just to access the new Blackberry spyware, SS8 that Etisalat installed and locate me ? Paranoiaaaaaaaaaa

Bora

LOVE the description of Leisurecorp, you did not happen to spend some time there did ya, I hear they had a desk full of marketing dolly's hired by the fat man

Istithmars investments are legend,Barneys cost $943MM, currently bid $350MM - the look on Jacksons face - priceless.

On that happy note - I am off to sleep. G'nite

viking-warrior wrote:Bora

LOVE the description of Leisurecorp, you did not happen to spend some time there did ya, I hear they had a desk full of marketing dolly's hired by the fat man

Istithmars investments are legend,Barneys cost $943MM, currently bid $350MM - the look on Jacksons face - priceless.

On that happy note - I am off to sleep. G'nite

Descriptions came directly from DW website.

I heard there might be a drop in Repo rates, so maybe credit can ease up again? Any info on the liquidity status of banks here?

And whats the news on the $3.5 billion( 3 billion was Goldman Sachs quarterly profit this year) Islamic Bonds that Nakheel had issued which expire later this year? Word has it that the Government may not support Nakheel?

DP world?Ha, I'm still holding shares at IPO price. No liquidity in that scrip whatsoeva! The company is heavily leveraged. Besides I'm really finding it difficult to accurately assess their financial statements.
You guys think DP world is a good investment, in terms of future prospects?

This leisurecop sounds cool. I've got tons of ideas!

As much as it pains me to say so - DP World is not going to sink any time soon and the shares at current levels are a good buy, so you might consider doubling down BUT it is a 5 to 10 year investment.

Leisurecorp is no more - it is now called Nakheel Ta Da - in a thinly veiled attempt to move assets into the Nakheel balance sheet to "add value" for the upcoming refinance

Good luck with trying get to the bottom of any analysis of financial statements on anything other than DPW - the obvious reason for this is to hide the true nature of the impending disaster. But hey what do I know ?!

Thanks, your commentary is both insightful and humorous!
Keep it coming!

The Case of the Missing Board Members

The DW website has been messed up now for 48 hours. Firstly it went down totally. Now they have got it back up, BUT minus the chairmans message and the list of board members.

Has the slowest corporate coup in history taken place? Has JMbT waddled his way into the throne or has The Buatti boy snuck in and taken the reigns?

Has SAbS been "Nassered" [def: to be shafted and sent to clean the toilets a la Nasser Sheikh] or is it all a spoof to keep us on our toes. I get a sense that something interesting is a foot!

Anyone with info - aint no fekker taking calls at the moment

Hey Viking do you have any know how on Surety Bonds and the kinda companies( insurance cos ) that would issue them?

Hey MSL

Have come across them, some call them Bank Guarantees as they are issued by banks on behalf a 3rd party and then insured. Some AA/AAA Insurance co's do issue them and there is a secondary market in them but beware of any individual who offers a Bank Guarantee for sale - 99% of the time it is totally bogus.

They are issued when a bank has sufficient collateral from a third party to issue a bond on their behalf - the bank makes the differential on the income from the debt and the coupon on the bond - really very simple.

Another way of looking at is as a CDO (!!) minus the loony high risk component of underlying NINJA loans

Hope that helps

Hey There Viking. Thanks for replying!

CDO's and CDS? I'm the kinda dweeb who's lost money on these instruments.
Are you still interested in CDO's at a time like this?Granted the low prices are rather tempting.... Ratings agencies in my opinion have absolutely screwed up CDO's. They'd give junk bonds a AAA rating. I can't believe those crooks would actually pack a worthless NINJA loan into a CDO!
Even JP Morgan has wound up their CDO unit. Maybe Shuaa would selling some.
Currently I'm closely following CIT. Ratings agencies are fairly certain that CDO's tied to CIT pose no risk of default. They said the same thing when Lehman went Bust!
I'm curious are insurance companies here selling Surety Bonds, via CDS?

What I really wanted to know if you could recommend any insurance cos that issue surety bonds to entrepreneurs. Cuz most banks here require a surety bond when issuing loans.

Your best bet is to contact a few of the main Insurance Underwriters & Reinsurers in London, that way your collateral is secured, the premium is market norm and the jurisdiction is favorable, in the event of a dispute.

Someone like Heath Lambert if they have not merged with someone else by now is a good place to start and a recognised name, so the bank in Dubai will be able to verify their good standing and ability to deliver.

Funnily enough Bahrain has a much better selection of Insurance companies than Dubai so you might want to start there (& Singapore too).

Personally I'd look at someone like Mitsui Sumitomo because of their size and diversity.

In respect of CDS no one is selling Surety Bonds via Credit Default Swaps but they are pricing off them especially in Dxb where the central bank rate is effectively a black box and available to no one anyway.

Specialist banks like CIT will continue to drop like flies over the next 12 months hence the reason to stay away from unknown names.

Hope some of that helps. Good luck

Wow Viking that's some info. It's gonna take me awhile to process it!
Thanks!

Hey Viking, you following the whole Al Sanea saga? A local bank, Al Gosaibi and a Kuwaiti Fighter pilot. We got a thriller on our hands? Whadya reckon?

No - but just been reading about it at your prompting .....

Looks like a case of falling out with the in-laws !! But also has the same resonance as the DIB-Plantation gig that is ongoing ...

Be interesting to see if Maan turns up in Dubai to restructure his deal with Mashreq and ends up eating raw chickpeas out at Al Awir !

I am constantly amazed at the level that these people seem to operate on - I have worked for some big groups and no one gets access to these levels of cash, yet in the Gulf as soon as something goes wrong in business, Out come the lunatic claims of embezzlement and fraud, in a kind of AC Milan just been tackled - kinda way (if you know what I mean, overacted)

It would make for a great soap opera "Days of our Billions"

So this all a case of giant egos eh? You know it does look like that.

My initial thoughts were, is this some kind of smokescreen? Considering that AHAB did default on an estimated $1billion loan, with another $700 repayment coming in November.
The Middle East Economic Digest reported on May 23 that Algosaibi had defaulted on $1 billion of foreign exchange transactions, trade finance loans and swap agreements. The magazine cited unidentified bankers.

The default by TIBC, Algosaibi’s Bahrain-based unit, was a “conscious decision not to honor debt payments,” even though the bank’s $400 million equity portfolio means it had enough money to do so, Standard & Poor’s Ratings Services said May 12.

Or maybe as you say this is nothing but over dramatized jibberish!

You know the funny thing is, the Al Saad group is actually registerd in Cayman Islands?

Guess it's time to sit back and watch the drama unfold. Wonder how it will affect Gulf family businesses?

I find the issue of jurisdiction to be interesting, any US attorney will ask - where did the bad act take place as that forms the basis for jurisdiction, therefore this mess must have been structured in NY or perhaps the FX was traded in NY. It is quite possible that a trade was put on by Mashreq on behalf of a "client" and the trade went south, Mashreq got margin called and passed on the margin call to the client, AHAB who on seeing the loss went postal and is now looking to pass on the blame to Maan, who might have been doing this type of trade successfully for some time ?

The scary thing is the size that is being discussed!! 10B moves the market, its that simple & if it is little more than a gamble then it is inconceivable that the principles did not know what was going on.

When you trade penny ante FX you can get 100 or 200 times leverage, but when you play with REAL money you are lucky to get 10 - 20 times, but that would still mean that this guy was laying down $100MM - $500MM to lose that kind of cash on a single trade. Any trader will tell you its only a matter of time before it bites you real hard on the ass.


I would love to be a fly on the wall at the next family get together

Wow I did'nt percieve it like that at all.
So in essence this guy siphons off funds from AHAB, and then uses if for speculative trade? He must've made a fortune doing this until now.

The margin call was probably to the tune of 75-150 Mill. Cuz 150 mill was what Mashreq sued AHAB for. What's I fail to understand is, if Mashreq made the deal with AL Sanea, then why sue AHAB. Just go after Al Sanea?
Then again considering the fact that AHAB's lawsuit includes forgery, this whole episode gets even more shady.

AHAB's $100B lawsuit seems more like mind games. 10 bill? looks like they trying to ravage this guy.

Hey, I'm rather naive here, so do companies actually maintain such huge capital just for speculative trading? And are the profit margins really all that great and consistent?

From the mess of information that I can see "out there" it looks like AHAB allowed all FX deals to be routed via Sanea's bank in Bahrain and from there out to the "Money Exchange".

If the example of the $150 million deal is accurate then they AHAB are pissed that they were charged 0.33% commission, or perhaps they are confusing the spot rate with the forward rate + a commission.

The norm is to charge a point spread over the forward or spot rate but who knows.

But I am afraid the anwser to your last question is an emphatic NO. These corps trade of lines of credit negotiated with banks such as Mashreq et al.

What they were probably doing was to buy forward for the year, dated at the end of each month, an estimated amount of the amount of foreign currency required to fund the remitances back to Indian/Pakistan/Sri Lanka/Bangladesh/Phillippines etc e.g. sell SR100MM buy PHP x 12 for each month forward.

In hindsight as you well know the rate will have moved, sometimes to the benefit of the dealer and sometimes not !! My money says that someone has looked at the books and said "Ah Ahmed look, they make very big money here, and here look they make very big loss" "This profit they are making it must be for me !!" (And screw the losses thats left for him)

The secondary trading done as a result of leveraging the proceeds of the commission/charges on the deals done is none of AHAB's business frankly as for Sanea there were the inherent risk attached - sounds like they wanted a chunk of the profit for none of the risk, but then on the flip side if Al Sanea was leveraging credit lines on behalf of AHAB then they do have a case, the profit on the resultant deals belongs to them - as does the losses (margin call) as claimed by Mashreq.


As usual for the region, the info available paints only half the picture (on both sides, or 3 sides if you include Mashreq) unfortunately we will never get to see the full picture unless it is disclosed in the NY courts.