MGM Mirage Suspends Casino Projects as Profit Falls

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MGM Mirage reported third-quarter net income fell 67% and said it was suspending plans to build new casino properties in Las Vegas and Atlantic City because of the credit crunch.

Predevelopment work has been done on the MGM Grand Atlantic City, but the company will halt development until the economy and capital markets "are sufficiently improved," said Chairman and Chief Executive Terry Lanni.

He added that design and preconstruction work on its Las Vegas joint venture with Kerzner International and Istithmar is also being deferred.

MGM has been struggling to find financing to complete construction of its $11 billion CityCenter project on the Las Vegas Strip.

The company reported net income of $61.3 million, or 22 cents a share, down from $183.9 million, or 62 cents a share, a year ago. Both periods had gains of seven cents and 30 cents a share, respectively. Revenue fell 5.7% to $1.95 billion.

Casino revenue decreased 8%, mainly due to a 13% fall in table games volume at its Las Vegas Strip properties. Total slots revenue dropped 6%, falling 13% on the Strip and more than offsetting double-digit increases at its Detroit and Tunica, Miss., properties.

Room revenue dropped 10% as occupancy rates fell to 95% from 97% on the Strip. where revenue per available room fell 10% as the average daily room rate dropped 9%.

The casino industry is facing what insiders and analysts call its biggest challenge in years. High gasoline prices, the housing crisis and other economic troubles are prompting consumers to gamble less and to spend less at the luxury boutiques and restaurants where casinos draw most of their profits.

Last week, Fitch Ratings cut its credit rating on MGM one further level into junk territory, citing concerns about its ability to refinance $1.28 billion in debt as well as fund new construction. The credit crisis has limited the ability of gaming companies to continue to borrow to create ever grander resorts, putting some in danger of violating covenants on lending agreements.

MGM Mirage is the biggest resort operator in Las Vegas. Its properties include the Bellagio, Mandalay Bay, Luxor and MGM Grand. It also has casinos in Illinois and Mississippi, along with a half-stake in the Borgata in Atlantic City, which is run by Boyd Gaming.

MGM Mirage also opened a casino in Macau late last year.

Write to John Kell at john.kell@dowjones.com