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MGM Mirage Struggles to Fulfill Obligations Due to the Financial Crisis

On June 28th, 2009, Former MGM Mirage CEO Terry Lanni received a compensation valued by the group at $5.8 million in 2008, almost forty percent less than in 2007. Lanni resigned from the group on November 30th, 2008 and was replaced by Chief Operating Officer Jim Murren, who was paid $3.7 million last year by the casino.

Neither Terry Lanni nor Jim Murren received monetary bonuses in 2008 as the Las Vegas-based organization failed to achieve its profit goal for the year. In 2007, Lanni received a total $6.36 million and Murren received $4.7 million in monetary bonuses, according to a statement filed before the US Securities and Exchange Commission.

Lanni's pay package includes $2 million in salary and $1.34 million in additional perks, including $717,000 for company contributions to an executive retirement plan and $482,000 for personal use of a company airplane.

Murren's package included a $1.5 million salary and $442,000 in additional perks, related to his retirement plan and use of the company's private aircraft. Lanni was given stock worth $2.48 million that day it was given, while Murren was given stock worth $1.77 million.

Shares of MGM Mirage slide down from $81.60 on January 2nd, 2008 to $13.76 on December 30th, 2008. The stock is now worth half of that, which is $6.77 per share.

Murren owned 2.6 million shares in MGM Mirage as of June 12th, less than one percent of the group. Lanni, who led the group for more than thirteen years and transformed it from a one-casino facility operation to its current position as the biggest casino operator on the strip, had no company shares left.

After his retirement, Lanni faced questions on whether he had life about receiving a degree from the University of Southern California. MGM Mirage has repeatedly denied that Lanni's retirement from the company had anything to do with that issue, stating that Lanni wanted to spend more time with his love ones and pursue other endeavors.

MGM Mirage's biggest stockholder is Kirk Kerkorian, who owns thirty-seven percent of the group's shares-163 million shares. Kerkorian lost his majority hold in the group in May after MGM Mirage issued new stock. The 92 year-old billionaire investor bought 14.3 million new company shares but it was not enough to maintain his 53.8% stake in the company.

MGM Mirage felt the effects of the financial crisis last year as players cut back heavily on discretionary spending. The smaller revenue combined with the collapse of the credit market made it difficult for MGM Mirage to acquire financing for its project, the $8.5 billion CityCenter on the Las Vegas Strip, a 50-50 collaboration with Dubai World.

MGM Mirage stated that its independent accountants no longer question its capability to continue as a company. MGM Mirage lost a total of $855 million in 2008, compared with a profit of $1.58 billion in 2007. Its profit dropped in the first 3 quarters as the economy started declining and it posted a $1.15 billion loss in the 4th quarter.

07/02/2009 21:36 PM

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