FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-31845
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JANUARY 20, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 4, 1997)
$500,000,000
[LOGO OF MGM GRAND, INC.]
% SENIOR COLLATERALIZED NOTES DUE 2005
--------------
The % Senior Collateralized Notes due 2005 (the "Notes") are being offered
by MGM Grand, Inc. (the "Company") in an aggregate principal amount of
$500,000,000. Interest on the Notes is payable semiannually in arrears on
and of each year, beginning , 1998, at the rate of %
per annum. The Notes will be guaranteed by certain of the Company's
subsidiaries and secured equally and ratably with the Company's bank credit
facility (the "Facility"). The Facility is secured by a pledge of substantially
all of the Company's assets, subject to certain exceptions, and the Notes will
also be initially so secured on a pro rata basis. If the Facility becomes
unsecured, the Notes will also become unsecured. See "Description of Notes"
herein and "Credit Facility" and "Description of Debt Securities" in the
accompanying Prospectus.
The Notes will be issued in book-entry form and represented by one or more
global notes (a "Global Note") in fully registered form, without coupons, which
will be deposited with a custodian for, and registered in the name of a nominee
of, The Depository Trust Company ("DTC") in New York, New York, as depositary
for the accounts of its participants. Beneficial interests in the Global Notes
will be represented, and transfers thereof will be effected, only through book-
entry accounts maintained by DTC and its direct or indirect participants.
Initial settlement for the Notes will be made in immediately available funds
and secondary market trading activity in beneficial interests therein will
therefore settle in such funds. Except in limited circumstances, definitive
Notes will not be issued in exchange for beneficial interests in the Global
Notes. See "Description of Notes--Book-Entry, Delivery and Form."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE NEW JERSEY CASINO CONTROL COMMISSION NOR ANY OTHER GAMING AUTHORITY HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT
MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
- --------------------------------------------------------------------------------
Per Note......................... % % %
- --------------------------------------------------------------------------------
Total............................ $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). See "Underwriting."
(3) Before deducting estimated expenses of $ payable by the Company.
--------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued and accepted by the Underwriters and certain other
conditions. The several Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
the Notes will be delivered in book-entry form only through the facilities of
DTC on or about January , 1998.
BANCAMERICA ROBERTSON STEPHENS DEUTSCHE MORGAN GRENFELL
--------------
CIBC OPPENHEIMER
The date of this Prospectus Supplement is January , 1998
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
STABILIZING SYNDICATE COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
S-2
THE COMPANY
MGM Grand, Inc. (the "Company") is an entertainment, hotel and gaming
company headquartered in Las Vegas, Nevada. Through its wholly-owned
subsidiaries, the Company owns and operates the MGM Grand Hotel and Casino in
Las Vegas ("MGM Grand Las Vegas"), which management believes is the largest
hotel/casino in the world, and the MGM Grand Hotel and Casino in Darwin,
Australia ("MGM Grand Australia"). The Company also owns a 50% interest in a
joint venture that owns and operates New York-New York Hotel and Casino ("New
York-New York"), an architecturally distinctive destination resort
hotel/casino in Las Vegas. The Company is also planning to construct
significant destination resort hotel/casino, entertainment and retail
facilities in Atlantic City, New Jersey and Detroit, Michigan. The Company's
subsidiary, MGM Grand South Africa, Inc. ("MGM Grand South Africa"), is
pursuing up to 15 gaming licenses in the Republic of South Africa, where it
currently operates one casino.
STRATEGY
The Company's strategy is to create unique destination resorts worldwide in
selected gaming markets which are designed to provide customers with a total
entertainment experience, including: first class accommodations, dining and
amenities; exciting production shows, sporting events, concerts and shopping;
and attractive gaming facilities. The Company utilizes entertainment themed
attractions, including well-known movie characters and settings, to create an
exciting environment appealing to all segments of the gaming market and also
utilizes targeted marketing programs to attract premium customers.
The Company's management team has implemented an operational restructuring
program designed to enhance revenues and minimize volatility, reduce operating
costs, maintain financial stability, promote the Company's reputation for
providing first class entertainment and position the Company for growth by
renovating and expanding existing properties and developing new destination
resorts.
EXISTING PROPERTIES
MGM Grand Las Vegas
MGM Grand Las Vegas, the Company's flagship property, is a multi-themed
destination resort, located on approximately 114 acres on the northeast corner
of Las Vegas Boulevard South (the "Strip") and Tropicana Avenue (the "New Four
Corners"). MGM Grand Las Vegas creates an exciting and unique gaming and
entertainment experience which is intended to appeal to all segments of the
Las Vegas market. Management believes MGM Grand Las Vegas is the largest
hotel/casino in the world and, because of the quality and variety of its
entertainment amenities, is a "must-see" attraction for visitors to Las Vegas.
MGM Grand Las Vegas features 5,005 guest rooms and suites, a 171,500 square
foot casino with approximately 3,700 slot machines and 160 table games, 11
restaurants, the 16,700 seat MGM Grand Garden Arena and two large showrooms,
which feature celebrity entertainers and EFX, a musical and special effects
extravaganza production show. MGM Grand Las Vegas received the Mobil Travel
Guide's Four Star Rating in 1998, the third consecutive year in which the
resort was accorded this honor. MGM Grand Las Vegas has several renowned
restaurants, including Emeril's New Orleans Fish House, which was designated
by the 1998 Zagat Survey of America's Top Restaurants as the best restaurant
in Las Vegas.
In an effort to continue a legacy of providing exceptional entertainment
through the leveraging of its highly recognizable brand name, the Company has
embarked on an extensive transformation of MGM Grand Las Vegas into "The City
of Entertainment." The Company's plan (the "Master Plan"), which is budgeted
at more than $700 million, calls for a new 1,500 room "Marriott Grand";
expansion of the resort's casino capacity by nearly 20% to more than 200,000
square feet; "The Mansion at the MGM Grand" offering 30 exclusive suites and
villas; a 380,000 square foot state of the art conference center; a 6.6 acre
Shangri-La pool and spa complex; significantly expanded and improved parking
facilities; and an approximately 45 foot tall new polished bronze lion
sculpture on a 25 foot pedestal, which will be the resort's signature,
adjoining a re-themed entertainment casino which includes a Rainforest Cafe
and Studio 54 nightclub. Substantially all of the transformation will be
S-3
completed by December 1998 with the exception of the Marriott Grand, which is
scheduled for completion in December 1999. The Company also plans by the year
2000 to begin construction of a 500 room Ritz-Carlton Hotel at MGM Grand Las
Vegas.
New York-New York (50%-Owned)
The Company is a 50% partner with Primadonna Resorts, Inc. in New York-New
York Hotel and Casino, LLC. ("NY-NY LLC"), a joint venture that owns and
operates New York-New York. The 47 story destination resort replicates many of
Manhattan's landmark buildings and icons, including the Statue of Liberty, the
Empire State Building, Central Park, the Brooklyn Bridge and a Coney Island-
style roller coaster. Management believes the 2,033 room and suite resort is
architecturally the most distinctive property ever built in Las Vegas. The
84,000 square foot casino offers approximately 2,400 slot machines and 70
table games. New York-New York is located on approximately 20 acres at the New
Four Corners directly across from MGM Grand Las Vegas. New York-New York has
substantially increased the foot traffic at MGM Grand Las Vegas since the two
facilities became connected by an extension of the existing elevated
pedestrian walkway.
MGM Grand Australia
MGM Grand Australia is located on 18 acres of beachfront property next to
the Arafura Sea on the north central coast in Darwin, Northern Territory,
Australia. The resort includes a public and private casino, 96 rooms,
restaurants and other facilities. Casino operations include table games, slots
("poker machines") and keno. The Company has positioned MGM Grand Australia as
a multi-faceted gaming/entertainment facility for the local market and as an
exclusive destination resort for premium international table game customers.
MGM Grand South Africa
The Company, together with its joint venture partner, Tsogo Sun Gaming &
Entertainment ("Tsogo Sun"), intends to apply for up to 15 gaming licenses
throughout the Republic of South Africa. MGM Grand South Africa manages a
casino in Nelspruit, which began operations on October 15, 1997, in the
Mpumalanga Province of the Republic of South Africa. A second casino is
scheduled to open in the first quarter of 1998 in Witbank, Mpumalanga
Province. The Company earns fees for the development and management of all
casino operations of Tsogo Sun, which will provide or procure all of the
financing necessary for the hotel/casino projects.
DEVELOPMENT OPPORTUNITIES
Atlantic City, New Jersey
The Company, through its wholly-owned subsidiary, MGM Grand Atlantic City,
Inc., intends to create a destination resort hotel/casino in Atlantic City
("MGM Grand Atlantic City") that will be larger and more elaborate than any
other facility currently in existence in that market. The Company expects to
use its unique entertainment themes extensively at MGM Grand Atlantic City,
and plans to offer a wide array of exciting and innovative gaming and non-
gaming amenities to its prospective customers. The Company believes that the
development and land acquisition costs of the proposed MGM Grand Atlantic City
project could be in excess of $700 million and take up to three years to
complete once the process of acquiring the necessary land has been finalized.
The Company has acquired or has the right to acquire approximately 35 acres
of land on the Atlantic City Boardwalk and has entered into an agreement with
FC Atlantic City Associates, L.P. (an affiliate of the Forest City Ratner
Company) for development. The plans for the hotel and casino resort will
include, among other features, entertainment and retail facilities. The
design, budget and schedule for development of the project are at a
preliminary stage. No assurance can be given that the Company will acquire the
necessary property or develop a hotel/casino in Atlantic City, or if it does,
as to its ultimate size, configuration or cost. Any development or operation
in Atlantic City will be subject to the finalization of the land acquisition
process and
S-4
the receipt of regulatory approvals. On July 24, 1996, the Company was found
suitable for licensing by the New Jersey Casino Control Commission.
Detroit, Michigan
In November 1997, the Company, along with several partners, was chosen to
develop and operate one of three casinos in Detroit, Michigan. The Company
anticipates the construction of a $700 million world-class hotel/casino resort
with an art deco theme. The approval of the Detroit City Council and the
Michigan Gaming Control Board is required prior to the development of each of
these three casinos. In an interview in January 1998, the Executive Director
of the Michigan Gaming Control Board indicated that it is anticipated that
casinos will open in Detroit sometime in the year 2000.
S-5
USE OF PROCEEDS
The net proceeds from the sale of the Notes, estimated to be approximately
$496 million, are expected to be used for general corporate purposes, which
may include financing the development and construction of new facilities,
additions to working capital, reductions of indebtedness of the Company and
its subsidiaries, financing of capital expenditures, potential acquisitions
and the repurchase by the Company of its Common Stock. Funds not immediately
required for such purposes may be invested in short-term investment grade
securities.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1997 and on an as adjusted basis to give effect to
this offering, after deduction of estimated expenses and underwriting
discounts and commissions.
SEPTEMBER 30, 1997
---------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
Cash and cash equivalents................................ $ 58,993 $ 554,993
========== ==========
Current obligation, long term debt....................... $ 11,767 $ 11,767
========== ==========
Current obligation, capital leases....................... $ 5,182 $ 5,182
========== ==========
Long term debt (less current portion):
Credit Facility........................................ $ -- $ --
Australian Hotel/Casino Loan........................... 55,439 55,439
% Senior Collateralized Notes due 2005................ -- 500,000
---------- ----------
55,439 555,439
Long term obligation, capital leases..................... 6,073 6,073
Stockholders' equity:
Common Stock, $.01 par value;
75,000,000 shares authorized;
57,973,602 issued.................................... 580 580
Capital in excess of par value......................... 966,182 966,182
Retained earnings...................................... 90,826 90,826
Currency translation................................... 3,293 3,293
---------- ----------
Total stockholders' equity........................... 1,060,881 1,060,881
---------- ----------
Total capitalization..................................... $1,122,393 $1,622,393
========== ==========
S-6
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information set forth below is qualified
in its entirety by, and should be read in conjunction with, the Company's
consolidated financial statements and notes thereto incorporated by reference
herein. The selected consolidated financial information presented below as of
and for the nine months ended September 30, 1996 and 1997 is derived from
unaudited consolidated financial statements; however, in the opinion of the
Company, all adjustments, consisting of normal recurring adjustments,
necessary for the presentation of the Company's financial position and results
of operations for such period have been included. Operating results for the
nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for future periods, including the entire year
ended December 31, 1997. MGM Grand Las Vegas commenced operations on
December 18, 1993. Therefore, the Company does not believe prior period
information is meaningful. Certain reclassifications have been made to prior
period financial statements to conform with the September 30, 1997
presentation.
NINE
YEAR ENDED DECEMBER 31, MONTHS ENDED SEPT. 30,
------------------------------- ------------------------
1994 1995 1996 1996 1997
--------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA
AND RATIOS)
REVENUES:
Casino................. $ 431,778 $ 401,680 $ 476,685 $ 352,109 $ 335,396
Rooms.................. 145,196 160,470 174,440 130,888 127,420
Food and beverage...... 91,566 89,299 78,438 58,799 69,342
Entertainment, retail
and other............. 122,758 123,307 126,475 93,730 86,723
Income from
unconsolidated
affiliate............. -- -- -- -- 42,351
--------- --------- --------- ----------- -----------
791,298 774,756 856,038 635,526 661,232
Less: Promotional
allowances............ 51,622 55,975 56,249 40,905 46,250
--------- --------- --------- ----------- -----------
739,676 718,781 799,789 594,621 614,982
OPERATING EXPENSES:
Casino................. 185,322 196,665 220,885 161,151 164,480
Rooms.................. 43,838 42,816 46,767 35,571 34,770
Food and beverage...... 65,033 57,516 47,127 35,832 40,949
Entertainment, retail
and other............. 113,093 89,820 85,637 63,965 59,981
Provision for doubtful
accounts and
discounts............. 44,181 57,683 38,635 29,202 22,735
General and
administrative........ 106,716 99,119 102,346 75,740 77,616
Depreciation and
amortization.......... 44,346 55,315 62,196 46,186 47,626
Restructuring costs.... -- 5,942 -- -- --
--------- --------- --------- ----------- -----------
602,529 604,876 603,593 447,647 448,157
Operating profit before
Master Plan asset
disposition, Preopening
and Corporate Expense.. 137,147 113,905 196,196 146,974 166,825
Master Plan asset
disposition........... -- -- 49,401 49,401 28,566
Preopening and other-
unconsolidated
affiliate............. -- -- 7,868 -- --
Corporate expense...... 7,432 10,082 9,633 4,543 1,312
--------- --------- --------- ----------- -----------
Operating income..... 129,715 103,823 129,294 93,030 136,947
NONOPERATING INCOME
(EXPENSE):
Interest income........ 5,544 2,896 4,247 3,873 961
Interest expense, net
of capitalized
interest(1) (61,927) (59,329) (33,778) (34,008) (1,242)
Interest expense from
unconsolidated
affiliate............. -- -- -- -- (7,519)
Other, net............. 208 (825) (612) (840) (649)
--------- --------- --------- ----------- -----------
Income from continuing
operations before
income taxes and
extraordinary items.... 73,540 46,565 99,151 62,055 128,498
Provision for income
taxes................. -- -- (24,634) (11,569) (46,655)
--------- --------- --------- ----------- -----------
Income from continuing
operations before
extraordinary items.... $ 73,540 $ 46,565 $ 74,517 $ 50,486 $ 81,843
========= ========= ========= =========== ===========
Net income.............. $ 74,576 $ 46,565 $ 43,706 $ 19,675 $ 77,605
========= ========= ========= =========== ===========
Weighted average shares
outstanding............ 48,988 48,544 54,235 52,637 58,778
Earnings per share from
continuing
operations(2).......... $ 1.50 $ 0.96 $ 1.37 $ 0.96 $ 1.39
OTHER DATA:
EBITDA(3)............... $ 181,493 $ 169,220 $ 258,392 $ 193,160 $ 214,451
Cash flow from operating
activities............. 94,461 114,544 245,151 168,639 115,117
Cash flow from investing
activities............. (192,955) (166,034) (120,815) (83,146) (110,838)
Cash flow from financing
activities............. (36,952) 85,648 (172,941) (132,493) (6,698)
MGM Grand Las Vegas
average daily room rate
("ADR")................ $ 86 $ 98 $ 101 $ 98 $ 98
MGM Grand Las Vegas
occupancy rate......... 92.0% 90.6% 94.7% 95.4% 96.8%
New York-New York net
revenues(4)............ -- -- -- -- 196,978
New York-New York
EBITDA(4).............. -- -- -- -- 101,857
New York-New York ADR... -- -- -- -- $ 96
New York-New York
occupancy rate......... -- -- -- -- 98.8%
Ratio of earnings to
fixed charges(5)....... 2.19 1.65 2.78 2.33 9.36
SEPTEMBER 30, 1997
----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 58,993 $ 554,993
Total assets............................................. 1,298,048 1,798,048
Long term debt........................................... 55,439 555,439
Stockholders' equity..................................... 1,060,881 1,060,881
S-7
- --------
(1) Capitalized interest for the years ended December 31, 1996, 1995 and 1994
was $7,023,000, $4,317,000 and $0, respectively. Capitalized interest for
the nine months ended September 30, 1997 and 1996 was $5,903,000 and
$3,905,000, respectively.
(2) Earnings per share for the first two quarters of the year ended December
31, 1995 was a cumulative loss of $0.03. In the third quarter of 1995, the
Company announced a restructuring plan to enhance revenues and reduce
operating costs. Earnings per share for the third quarter of 1995 was
$0.33. Earnings per share for the fourth quarter of 1995, which was the
first full quarter in which the benefits of the restructuring were
realized, was $0.66.
(3) "EBITDA" consists of net income (before extraordinary items, Master Plan
asset disposition, Preopening expenses and discontinued operations) plus
corporate expense, net interest expense, interest expense from
unconsolidated affiliate, taxes, depreciation and amortization and other
nonoperating items, net. EBITDA should not be construed as an alternative to
operating income as an indicator of the Company's operating performance, or
as an alternative to cash flows generated by operating, investing or
financing activities as an indicator of cash flows or a measure of
liquidity, or as any other measure of performance determined in accordance
with generally accepted accounting principles. The Company has presented
EBITDA solely as supplemental disclosure because the Company believes that
certain investors consider this information useful in the comparison and
evaluation of financial performance of companies with substantial
depreciation and amortization.
(4) New York-New York amounts represent 100% of the operating results, of
which the Company has a 50% interest.
(5) For purposes of computing the foregoing ratios: (i) "Earnings" consist of
income from continuing operations before income taxes and fixed charges,
adjusted to exclude capitalized interest, and (ii) "Fixed Charges" consist
of interest, whether expensed or capitalized, amortization of debt
discount and issuance costs, the Company's proportionate share of the
interest cost of 50%-owned joint ventures (such as the limited liability
company which owns New York-New York).
S-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS
ENDED SEPTEMBER 30, 1996
Net revenues for the nine months ended September 30, 1997 were $615.0
million, representing an increase of $20.4 million (3.4%) when compared with
$594.6 million during the same period in 1996. The increase in net revenues
was largely due to income from the Company's 50% ownership in New York-New
York and higher food and beverage revenues, partially offset by decreased
casino, room, entertainment, retail and other revenues.
Consolidated casino revenues for the nine months ended September 30, 1997
were $335.4 million, representing a decrease of $16.7 million (4.7%) when
compared with $352.1 million during the same period in the prior year. MGM
Grand Las Vegas casino revenues were $315.0 million, representing a decrease
of $15.8 million (4.8%) when compared with $330.8 million during the same
period in the prior year. The reduction in casino revenues at MGM Grand Las
Vegas was a result of lower table games win percentages, and lower slot volume
and win percentage. MGM Grand Australia reported casino revenues of $20.4
million, representing a decrease of $0.9 million (4.2%) when compared with
$21.3 million during the same period in the prior year, primarily attributable
to lower baccarat volume and win partially offset by an increase in slot
volume and win along with Northern Territory Keno which was not operational in
the prior year's nine month results.
Consolidated room revenues for the period were $127.4 million compared with
$130.9 million for the same period in 1996, representing a decrease of $3.5
million (2.7%). MGM Grand Las Vegas room revenues were $125.8 million,
representing a decrease of $3.5 million (2.7%) when compared with $129.3
million in the same period of the prior year. The decrease was due to a lower
occupancy of 95.4% for the 1997 period when compared with 96.8% in the same
period of the prior year. The average daily room rate for the 1997 period of
$98 was consistent with the 1996 period. MGM Grand Australia room revenues
were $1.8 million for the nine months ended September 30, 1997, representing
an increase of $0.2 million (12.5%) when compared with $1.6 million for the
prior year period due mainly to the room renovation in the prior year.
Consolidated food and beverage revenues for the period were $69.3 million,
representing an increase of $10.5 million (17.9%) when compared with $58.8
million for the same period of the prior year. The increase was attributable
to MGM Grand Las Vegas, which had food and beverage revenues of $64.3 million
during the current period, an increase of $10.2 million (18.9%) when compared
with $54.1 million in the same period of 1996. This increase reflects the
Company's decision to operate the previously leased Studio Cafe coffee shop.
MGM Grand Australia reported food and beverage revenues of $5.2 million,
representing an increase of $0.5 million (10.6%) when compared with $4.7
million during the same period in the prior year.
Consolidated entertainment, retail and other revenues decreased $7.0 million
(7.5%) from $93.7 million in the 1996 period to $86.7 million in the 1997
period. The decrease was attributable to MGM Grand Las Vegas, which had lower
theme park and midway/arcade revenues due to downsizing the facilities as well
as lower EFX revenues. These decreases were partially offset by increases in
MGM Grand Garden Arena revenues and increased revenues from the SkyScreamer
thrill ride which became operational in September 1996.
Income from unconsolidated affiliate was $42.4 million for the nine months
ended September 30, 1997, representing the Company's 50% share of New York-New
York's operating income. The operating results from New York-New York were not
consolidated with those of the Company, since consolidation is required only
with greater than 50% ownership.
Consolidated operating expenses (before Master Plan asset disposition and
Corporate expense/income) for the 1997 period were $448.2 million, which were
consistent when compared with $447.6 million for the same period in the prior
year. The increase was attributable to MGM Grand Las Vegas, offset by
decreases at MGM Grand Australia. The increases at MGM Grand Las Vegas were
due primarily to increased casino, food and
S-9
beverage, and advertising expenses offset by lower expenses related to EFX and
midway/arcade operations. Additionally, the provision for doubtful accounts
and discounts decreased by $6.5 million at MGM Grand Las Vegas as a result of
reduced casino revenues, changes in anticipated collectibility and collections
made on previously reserved receivable balances. MGM Grand Australia's
operating expenses decreased $4.9 million (17.1%) from $28.7 million in the
1996 period to $23.8 million in the 1997 period as a result of continuing cost
containment efforts.
Master Plan asset disposition relates to the write-off of various assets
related to the transformation of MGM Grand Las Vegas into "The City of
Entertainment." The prior year charge of $49.4 million (pre-tax) was
recognized when the plan was announced, and the current year charge of $28.6
million (pre-tax) resulted from the increase in the transformation scope from
$250.0 million to over $700.0 million.
Interest income of $1.0 million for the period ended September 30, 1997
decreased by $2.9 million from $3.9 million in the same period of 1996. The
decrease was attributable to lower invested cash balances at MGM Grand Las
Vegas during the 1997 period.
Interest expense for the nine months ended September 30, 1997 of $1.2
million (net of amounts capitalized) decreased by $32.8 million when compared
with $34.0 million in the same period of 1996. The decrease in the 1997 period
was primarily due to the defeasance of the First Mortgage Notes issued by MGM
Grand Hotel Finance Corp. (the "First Mortgage Notes") in the 1996 period,
along with greater capitalization of interest in the current year from
continuing construction and development projects. Also, the Company recognized
interest expense from its unconsolidated affiliate of $7.5 million during the
1997 period.
Income tax provision of $46.7 million has been recorded at a rate of 36.3%
for the nine months ended September 30, 1997, compared with $11.6 million in
1996 at a rate of 18.6%. The 1996 rate was lower than 1997, reflecting no
provision in the first quarter of 1996 due to the benefit resulting from the
reduction of the valuation allowance.
Extraordinary loss of $4.2 million, net of income tax benefit, reflects the
write-off of unamortized debt costs from the previous $600.0 million credit
facility in the 1997 period. The extraordinary loss of $30.8 million, net of
income tax benefit, in the prior year represented the loss on defeasance of
the First Mortgage Notes.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997 and December 31, 1996, the Company held cash and
cash equivalents of $59.0 million and $61.4 million, respectively. Cash
provided by operating activities for the first nine months of 1997 was $115.1
million compared with $168.6 million for the same period of 1996.
On May 6, 1996, MGM Grand Las Vegas announced details of a 30 month, $250.0
million Master Plan designed to transform the facility into "The City of
Entertainment." The Master Plan, which on June 3, 1997 was enhanced and
increased to more than $700.0 million, calls for a new 1,500 room "Marriott
Grand"; expansion of the resort's casino capacity by nearly 20% to more than
200,000 square feet; "The Mansion at the MGM Grand" offering 30 exclusive
suites and villas; a 380,000 square foot state of the art conference center; a
6.6 acre Shangri-La pool and spa complex; significantly expanded and improved
parking facilities; and an approximately 45 foot tall new polished bronze lion
sculpture on a 25 foot pedestal, which will be the resort's signature,
adjoining a re-themed entertainment casino which includes a Rainforest Cafe
and Studio 54 nightclub. The Company also announced that by the year 2000, it
plans to begin construction of a 500 room Ritz-Carlton Hotel at MGM Grand Las
Vegas. Approximately $189.3 million is expected to be expended during 1997
related to the Master Plan, of which $73.0 million was expended through
September 30,1997.
Capital expenditures during the first nine months of 1997 were $119.0
million, consisting primarily of $28.8 million related to MGM Grand Las Vegas
for general property improvements, $73.0 million for the Master Plan project,
$1.9 million at MGM Grand Australia for general property improvements and
$15.3 million for MGM Grand Atlantic City land acquisition costs and pre-
construction activities. Remaining capital expenditures
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for 1997, as of September 30, 1997, were approximately $133.6 million,
consisting of approximately $116.3 million related to the Master Plan,
approximately $8.2 million related to general property improvements for MGM
Grand Las Vegas, approximately $8.3 million related to land acquisitions and
pre-construction activities for MGM Grand Atlantic City, and approximately
$0.8 million for MGM Grand Australia.
The Company made a capital contribution of $7.0 million to NY-NY LLC during
the first nine months of 1997. As a lender requirement for the project
financing, both the Company and its partner, Primadonna Resorts, Inc., were
required to enter into a joint and several Keep-Well Agreement. The Company
also received $12.6 million in distributions from NY-NY LLC during the nine
months ended September 30, 1997 to pay taxes on its allocated share of income.
The Company expects to finance operations and capital expenditures through
cash flow from operations, cash on hand, the Facility and other bank lines of
credit, and the proceeds of this offering.
SAFE HARBOR PROVISION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Prospectus Supplement contains statements that are forward-looking, such as
statements relating to plans for future expansion and other business
development activities, as well as other capital spending, financing sources,
the effects of regulation (including gaming and tax regulations) and
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the
future and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks
and uncertainties include, but are not limited to, those relating to
development and construction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations in interest
rates), domestic or global economic conditions (including sensitivity to
fluctuations in foreign currencies), changes in federal or state tax laws or
the administration of such laws, changes in gaming laws or regulations
(including the legalization of gaming in certain jurisdictions) and
application for licenses and approvals under applicable jurisdictional laws
and regulations (including gaming laws and regulations).
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REGULATION AND LICENSING
NEVADA
The ownership and operation of casino gaming facilities in Clark County,
Nevada, are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the "Nevada Act"); and (ii) various
local regulations. The Company's gaming operations are subject to the
licensing and regulatory control of the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and
the Clark County Liquor and Gaming Licensing Board (the "CCLGLB"). The Nevada
Commission, the Nevada Board, and the CCLGLB are collectively referred to as
the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) providing a source of state and
local revenues through taxation and licensing fees. Any change in such laws,
regulations and procedures could have an adverse effect on the Company's
gaming operations.
The Company's wholly owned subsidiary, MGM Grand Hotel, Inc., operates a
casino and is required to be licensed by the Nevada Gaming Authorities. The
gaming license requires the periodic payment of fees and taxes and is not
transferable. MGM Grand Hotel, Inc. is also licensed as a manufacturer and
distributor of gaming devices, and as the operator of the race book and sports
pool at New York-New York. The Company is required to be licensed as one of
the two managers of New York-New York. The Company is also required to be
registered by the Nevada Commission as a publicly traded corporation
("Registered Corporation") and as such, it is required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish
any other information that the Nevada Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, MGM Grand
Hotel, Inc. or NY-NY LLC without first obtaining licenses and approvals from
the Nevada Gaming Authorities. The Company, MGM Grand Hotel, Inc. and NY-NY
LLC have obtained from the Nevada Gaming Authorities the various
registrations, approvals, permits and licenses required in order to engage in
gaming activities in Nevada.
The Nevada Commission may, in its discretion, require the holder of any debt
security, such as the Notes, of a Registered Corporation to file an
application, be investigated and be found suitable to own the debt security of
a Registered Corporation. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss of its approvals,
if without the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest, or any distribution whatsoever; (ii)
recognizes any voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any form; or (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction.
The Company may not make a public offering of any securities, including the
Notes, without the prior approval of the Nevada Commission if the securities
or the proceeds therefrom are intended to be used to construct, acquire or
finance gaming facilities in Nevada, or to retire or extend obligations
incurred for such purposes. Such approval, if given, does not constitute a
finding, recommendation or approval by the Nevada Commission or the Nevada
Board as to the accuracy or adequacy of the prospectus or the investment
merits of the securities. Any representation to the contrary is unlawful.
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On July 24, 1997, the Nevada Commission granted the Company prior approval
to make public offerings of securities, including the Notes, for a period of
two years, subject to certain conditions (the "Shelf Approval"). The Shelf
Approval also applies to any affiliated company wholly owned by the Company (a
"Gaming Affiliate") which is already a Registered Corporation or would become
a publicly traded corporation because of such public offering. The Shelf
Approval also includes approval for MGM Grand Hotel, Inc. to guarantee any
security issued by, or to hypothecate its assets to secure the payment or
performance of any obligations issued by, the Company or a Gaming Affiliate
pursuant to a public offering by the Company or a Gaming Affiliate under the
Shelf Approval. In addition, the Shelf Approval includes approval for the
Company or a Gaming Affiliate to place restrictions upon the transfer of, and
to enter into agreements not to encumber, the equity securities of MGM Grand
Hotel, Inc., pursuant to a public offering made by the Company or a Gaming
Affiliate under the Shelf Approval. However, the Shelf Approval may be
rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Chairman of the Nevada Board. The Shelf
Approval does not constitute a finding, recommendation or approval by the
Nevada Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities offered. Any
representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he or she obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and the Nevada Commission
concerning a variety of stringent standards prior to assuming control of such
Registered Corporation. The Nevada Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to
be investigated and licensed as part of the approval process of the
transaction.
Consistent with the foregoing, the Indenture governing the Notes will
provide that such holder and beneficial owner thereof, by accepting any of the
Notes, shall be deemed to have agreed that if the Nevada Gaming Authorities
require that a person who is a holder or beneficial owner of the Notes must be
licensed, qualified or found suitable under applicable Nevada Gaming Laws,
such holder or beneficial owner shall apply for a license, qualification or
finding of suitability within the required time period. If such person fails
to apply or become licensed or qualified or is not found suitable (in each
case, a "failure of compliance"), the Company shall have the right, at its
option, (i) to require such person to dispose of its Notes or beneficial
interest therein within 30 days of receipt of notice of the Company's election
or such earlier date as may be requested or prescribed by the Nevada Gaming
Authorities; or (ii) to redeem the Notes at a redemption price equal to 100%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the earlier of the redemption date or the date of the failure of compliance,
which may be less than 30 days following the notice of redemption if so
requested or prescribed by the Nevada Gaming Authorities. The Company shall
also have the right under the Indenture to call for the redemption of the
Notes from any holder or beneficial owner at any time to prevent the loss or
material impairment of a gaming license or an application for a gaming license
at a redemption price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the earlier of the redemption date or
the date of the failure of compliance, which may be less than 30 days
following the notice of redemption if so requested or prescribed by the Nevada
Gaming Authorities. The Company shall notify the Trustee under the Indenture
of any such redemption as soon as practicable. The Company shall not be
responsible for any costs or expenses any such holder or beneficial owner may
incur in connection with its application for a license, qualification or
finding of suitability.
For a more detailed description of the various applicable Nevada gaming
regulatory requirements, see "Regulation and Licensing--Nevada" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996.
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NEW JERSEY
The ownership and operation of hotel/casino facilities and gaming activities
in Atlantic City, New Jersey are subject to extensive state regulation under
the New Jersey Casino Control Act (the "New Jersey Act") and the regulations
("Regulations") of the New Jersey Casino Control Commission (the "New Jersey
Commission") and other applicable laws. In order to operate a hotel/casino
facility in New Jersey, MGM Grand Atlantic City, Inc. must obtain a license
from the New Jersey Commission and obtain numerous other licenses, permits or
approvals from other state as well as local governmental authorities. The
New Jersey Act also established the New Jersey Division of Gaming Enforcement
(the "New Jersey Division") to investigate all license applications, enforce
the provisions of the New Jersey Act and Regulations and prosecute all
proceedings for violations of the New Jersey Act and Regulations before the
New Jersey Commission.
The New Jersey Commission has broad discretion regarding the issuance,
renewal, revocation and suspension of casino licenses. The New Jersey Act and
Regulations concern primarily the good character, honesty, integrity and
financial stability of casino licensees, their intermediary and holding
companies, their employees, their security holders and others financially
interested in casino operations; financial and accounting practices used in
connection with casino operations; rules of games, levels of supervision of
games and methods of selling and redeeming chips; manner of granting credit,
duration of credit and enforceability of gaming debts; and distribution of
alcoholic beverages.
The Company's wholly owned subsidiary, MGM Grand Atlantic City, Inc., has
applied to be licensed by the New Jersey Commission to operate a casino, and
the Company has applied to be approved as a qualified holding company. On July
24, 1996, the Company and MGM Grand Atlantic City, Inc. and their then
officers, directors, and 5% or greater shareholders were found suitable for
licensing by the New Jersey Commission. These findings of suitability are
subject to review and revision by the New Jersey Commission based upon a
change in any material fact that is relevant to the findings.
The New Jersey Act further provides that each person who directly or
indirectly holds any beneficial interest or ownership of the securities issued
by a casino licensee or any of its intermediary or holding companies, those
persons who, in the opinion of the New Jersey Commission, have the ability to
control the casino licensee or its intermediary or holding companies or elect
a majority of the board of directors of said companies, other than a banking
or other licensed lending institution which makes a loan or holds a mortgage
or other lien acquired in the ordinary course of business, lenders and
underwriters of said companies are required to be qualified by the New Jersey
Commission. However, with respect to a publicly traded holding company such as
the Company, a waiver of qualification may be granted by the New Jersey
Commission, with the concurrence of the Director of the New Jersey Division,
if the New Jersey Commission determines that said persons or entities are not
significantly involved in the activities of MGM Grand Atlantic City, Inc. and,
in the case of security holders, do not have the ability to control the
Company or elect one or more of its directors. There exists a rebuttable
presumption that any person holding 5% or more of the equity securities of a
casino licensee's intermediary or holding company or a person having the
ability to elect one or more of the directors of such a company has the
ability to control the company and thus must obtain qualification from the New
Jersey Commission.
Notwithstanding this presumption of control the New Jersey Act provides for
a waiver of qualification for passive "institutional investors," as defined by
the New Jersey Act, if the institutional investor purchased publicly traded
securities for investment purposes only and where such securities constitute
(i) less than 10% of the equity securities of a casino licensee's holding or
intermediary company or (ii) debt securities of a casino licensee's holding or
intermediary company representing a percentage of the outstanding debt of such
company not exceeding 20% or a percentage of any issue of the outstanding debt
of such company not exceeding 50%. The waiver of qualification is subject to
certain conditions including, upon request of the New Jersey Commission,
filing a certified statement that the institutional investor has no intention
of influencing or affecting the affairs of the issuer, except that an
institutional investor holding voting securities shall be permitted to vote on
matters put to a vote of the holders of outstanding voting securities.
Additionally, a waiver of qualification may also be granted to institutional
investors holding a higher percentage of securities of a casino licensee's
holding or intermediary company upon a showing of good cause.
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The New Jersey Act requires the certificate of incorporation of a publicly
traded holding company to provide that any securities of such corporation are
held subject to the condition that if a holder is found to be disqualified by
the New Jersey Commission pursuant to the New Jersey Act, such holder shall
dispose of his interest in such company. Accordingly, the Company amended its
Certificate of Incorporation to provide that a holder of the Company's
securities must dispose of such securities if the holder is found disqualified
under the New Jersey Act. In addition, the Company amended its Certificate of
Incorporation to provide that the Company may redeem the stock of any holder
found to be disqualified.
If the New Jersey Commission should find a security holder to be unqualified
to be a holder of securities of a casino licensee or holding company, not only
must the disqualified holder dispose of such securities but, in addition,
commencing on the date the New Jersey Commission serves notice upon such a
company of the determination of disqualification, it shall be unlawful for the
disqualified holder (i) to receive any dividends or interest upon any such
securities, (ii) to exercise, directly or through any trustee or nominee, any
right conferred by such securities, or (iii) to receive any remuneration in
any form from the licensee for services rendered or otherwise. If the New
Jersey Commission should find a security holder to be unqualified to be a
holder of securities of a casino licensee or holding company, the New Jersey
Commission shall take any necessary action to protect the public interest
including the suspension or revocation of the casino license except that if
the disqualified person is the holder of securities of a publicly traded
holding company, the New Jersey Commission shall not take action against the
casino license if (i) the holding company has the corporate charter provisions
concerning divestiture of securities by disqualified owners required by the
New Jersey Act, (ii) the holding company has made good faith efforts including
the pursuit of legal remedies to comply with any order of the New Jersey
Commission, and (iii) the disqualified holder does not have the ability to
control the company or elect one or more members of the company's board of
directors.
If, after licensure, the New Jersey Commission determines that MGM Grand
Atlantic City, Inc. has violated the New Jersey Act or Regulations, or if any
security holder of the Company or MGM Grand Atlantic City, Inc. who is
required to be qualified under the New Jersey Act is found to be disqualified
but does not dispose of the securities, MGM Grand Atlantic City, Inc. could be
subject to fines or its license could be suspended or revoked. If MGM Grand
Atlantic City, Inc.'s license is revoked after issuance, the New Jersey
Commission could appoint a conservator to operate and to dispose of any
hotel/casino facilities of MGM Grand Atlantic City, Inc. Net proceeds of a
sale by a conservator and net profits of operations by a conservator (at least
up to an amount equal to a fair return on MGM Grand Atlantic City, Inc.'s
investment which is reasonable for casinos or hotels) would be paid to the
Company.
The New Jersey Act imposes an annual tax of eight percent on gross casino
revenues (as defined in the New Jersey Act). In addition, casino licensees are
required to invest one and one-quarter percent of gross casino revenues for
the purchase of bonds to be issued by the Casino Reinvestment Development
Authority or make other approved investments equal to that amount. In the
event the investment requirement is not met, the casino licensee is subject to
a tax in the amount of two and one-half percent on gross casino revenues. The
New Jersey Commission has established fees for the issuance or renewal of
casino licenses and casino hotel alcoholic beverage licenses and an annual
license fee on each slot machine.
In addition to compliance with the New Jersey Act and Regulations relating
to gaming, any facility built in Atlantic City by MGM Grand Atlantic City,
Inc. or any other subsidiary of the Company must comply with the New Jersey
and Atlantic City laws and regulations relating to, among other things, the
Coastal Area Facilities Review Act, construction of buildings, environmental
considerations, and the operation of hotels.
MICHIGAN
The State of Michigan has enacted the Michigan Gaming Control and Revenue
Act (the "Michigan Act") which subjects the ownership and operation of casino
gaming facilities to extensive state licensing and regulatory requirements.
The Michigan Act also authorizes local regulation of casino gaming facilities
by the City of
S-15
Detroit, provided that any such local ordinances regulating casino gaming are
consistent with the Michigan Act and rules promulgated to implement it.
The Michigan Act creates the Michigan Gaming Control Board (the "Board") and
authorizes it to grant casino licenses to not more than three applicants who
have entered into development agreements with the City of Detroit. The Board
is granted extensive authority to conduct background investigations and
determine the suitability of casino license applicants, affiliated companies,
officers, directors, or managerial employees of applicants and affiliated
companies and persons or entities holding a one percent or greater direct or
indirect interest in an applicant or affiliated company. Institutional
investors holding less than certain specified amounts of debt or equity
securities are exempted from meeting the suitability requirements of the
Michigan Act, provided such securities are issued by a publicly-traded
corporation, such as the Company, and the securities were purchased for
investment purposes only and not for the purpose of influencing or affecting
the affairs of the issuer.
The Michigan Act imposes the burden of proof on the applicant for a casino
license to establish its suitability to receive and hold the license. The
applicant must establish its suitability as to integrity, moral character and
reputation, business probity, financial ability and experience,
responsibility, and other criteria deemed appropriate by the Board. A casino
license is valid for a period of one year and the Board may refuse to renew it
upon a determination that the licensee no longer meets the requirements for
licensure.
The Board may, among other things, revoke, suspend or restrict a casino
license. Substantial fines or forfeiture of assets for violations of gaming
laws or rules may also be levied against a casino licensee. In the event that
a casino license is revoked or suspended for more than 120 days, the Michigan
Act provides for the appointment of a conservator who, among other things, is
required to sell or otherwise transfer the assets of the casino licensee or
former licensee to another person or entity who meets the requirements of the
Michigan Act for licensure.
The Board recently approved administrative rules (the "Proposed Rules") to
implement the terms of the Michigan Act. The Proposed Rules are currently
being reviewed by the Governor's Office of Regulatory Reform and the
Legislative Services Bureau of the Michigan Legislature for certification.
After certification, they will be submitted to the Joint Rules Committee of
the Michigan Legislature for review and approval. The Proposed Rules are
subject to modification at any time prior to their final adoption by the
Board.
S-16
DESCRIPTION OF NOTES
The Notes offered hereby constitute a series of Debt Securities (which are
more fully described in the accompanying Prospectus) to be issued pursuant to
an indenture (the "Indenture") between the Company and PNC Bank, as trustee
(the "Trustee"). The following description of the particular terms of the
Notes supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is hereby made. The
terms of the Notes include those provisions contained in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "TIA"). The Notes are subject to all such terms, and
holders of Notes are referred to the Indenture and the TIA for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Indenture, including the definitions therein of certain
defined terms used below and not otherwise defined below. Copies of the
Indenture and the Notes are available for inspection at the office of the
Trustee located at .
GENERAL
The Notes will be direct obligations of the Company, guaranteed pursuant to
guarantees included in the Indenture (the "Guarantees") by each of the
Company's Subsidiaries other than the Excluded Subsidiaries (the
"Guarantors"). The Notes and Guarantees will be secured by a pledge of
substantially all of the assets of the Company and the Guarantors, excluding
the Company's interest in the Excluded Subsidiaries. See "--Security" below.
Approval for the Guarantees and the Collateral therefor (except the
Conditional Collateral) was included in the Shelf Approval. See "Regulation
and Licensing--Nevada." The payment of the principal of, premium, if any, and
interest on the Notes shall be pari passu in right of payment to the Facility,
which presently provides a $1.25 billion credit facility, which may be
increased to $1.5 billion under its existing terms. The lenders under the
Facility also have a security interest in the Collateral, which is pari passu
with that of the Trustee. The Notes and Guarantees can become unsecured, at
the Company's option, if the Facility contemporaneously becomes unsecured and
each of the unsecured Facility and Notes receive investment grade ratings from
both Moody's and Standard & Poor's (and the Company obtains confirmation that
such release of collateral will not result in a reduction below the respective
rating issued by either such entity as of the date of issuance of the Notes).
As provided in its guarantee of the Facility, the Guarantee of MGM Grand
Detroit, LLC is limited to the amount of proceeds, if any, made available to
MGM Grand Detroit, LLC.
The Notes will be limited to $500,000,000 aggregate principal amount and
will mature on , 2005.
The Notes will be issued only in fully registered book-entry form without
coupons in denominations of $1,000 and integral multiples thereof, except
under the limited circumstances described below under "--Book-Entry, Delivery
and Form."
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus and "--Additional Covenants of the Company"
below for a description of the covenants applicable to the Notes. Compliance
with such covenants generally may not be waived by the Trustee unless the
holders of at least a majority in principal amount of all outstanding Notes
consent to such waiver; provided, however, that the Company need not comply
with such covenants in the event it elects to comply with the defeasance or
covenant defeasance provisions of the Indenture described under "Description
of Debt Securities--Defeasance of Debt Securities or Certain Covenants in
Certain Circumstances" in the accompanying Prospectus.
The Indenture does not contain any limitation on the amount of the Company's
indebtedness, including the indebtedness under the Facility that is secured by
the Collateral on a pari passu basis. Except as described under "Description
of Debt Securities--Merger, Consolidation or Sale of Assets" in the
accompanying Prospectus or "--Additional Covenants of the Company" below and
except for the liens provided by the Collateral Documents, the Indenture does
not contain any other provisions that would afford holders of the Notes
protection in the event of (i) a highly leveraged or similar transaction
involving the Company, (ii) a change of control, or (iii) a reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect the holders of the Notes. In addition, subject to the
limitations set forth under "Description of Debt
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Securities--Merger, Consolidation or Sale of Assets" in the accompanying
Prospectus, under "--Additional Covenants of the Company" below and under the
Collateral Documents, the Company may, in the future, enter into certain
transactions such as the sale of all or substantially all of its assets or the
merger or consolidation of the Company with another entity that would increase
the amount of the Company's indebtedness or substantially reduce or eliminate
the Company's assets, which may have an adverse effect on the Company's
ability to service its indebtedness, including the Notes.
INTEREST AND MATURITY
The Notes will pay interest semiannually at a rate of % per annum from
the date of issuance of the Notes (the "Issue Date") until maturity. Interest
on the Notes will accrue from the most recent Interest Payment Date to which
interest has been paid, or if no interest has been paid, from the Issue Date.
Interest shall be payable semiannually in arrears on and of
each year, commencing , 1998 (each an "Interest Payment Date"), to the
person in whose name the Note is registered (a "Noteholder") at the close of
business on the preceding or , as the case may be, next preceding
such Interest Payment Date. Principal of and premium, if any, and interest on
the Notes will be payable, and the transfer of the Notes may be registered, at
the office of the Trustee in , .
In the event the Company elects to defease the Notes pursuant to the
defeasance provisions of the Indenture as described in the accompanying
Prospectus under "Description of Debt Securities--Defeasance of Debt
Securities or Certain Covenants in Certain Circumstances," the interest rate
in effect for the Notes on the date of the irrevocable deposit of the money
and/or U.S. Government Obligations as trust funds in trust for the benefit of
the holders of the Notes shall be the rate used by the Company in calculating
the requisite interest and principal payments necessary to defease the Notes
(the "Defeasance Coupon"). The Adjusted Coupon and the Defeasance Coupon shall
not thereafter be affected by any change in rating.
The Notes will mature on , 2005. Except as described under
"Description of Debt Securities--Mandatory Disposition Pursuant to Gaming
Laws" in the accompanying Prospectus or under "--Optional Redemption" or "--
Additional Covenants of the Company--Special Asset Sales" below, the Notes are
not subject to any redemption or sinking fund provisions.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) as determined by a Quotation Agent,
the sum of the present values of the remaining scheduled payments of principal
and interest thereon discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in such case, accrued interest thereon to the date of
redemption.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, interest will
cease to accrue on the Notes or portions thereof called for redemption on and
after the redemption date.
SECURITY
The Notes and Guarantees will be secured by a first priority security
interest in substantially all of the assets of the Company and the Company's
Subsidiaries, including real estate, fixed assets, capital stock of
Subsidiaries, accounts, inventory, intellectual property rights and other
intangible assets now in existence or hereinafter acquired (the "Collateral"),
other than assets of the Excluded Subsidiaries and stock of Excluded
Subsidiaries and provided that the Collateral shall not include the stock of
MGM Grand Hotel, Inc., a Nevada corporation, MGM Grand Atlantic City, Inc., a
New Jersey corporation, or MGM Grand Detroit, Inc., a Michigan corporation, or
interests in or assets of MGM Grand Detroit, LLC, a Delaware limited liability
company, unless and until the requisite governmental consents for a pledge of
such stock, interests and assets are obtained (the "Conditional
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Collateral"). If the Company fails to obtain all necessary governmental
consents and to provide such pledge by , 1998, then the interest rate
borne by the Notes shall be increased by one-quarter of one percent per annum,
retroactive from the date of original issuance of the Notes and continuing
until such date on which such pledge is completed or the pledge of such stock
that secures the Facility is released.
The Company and the Guarantors will enter into security agreements, pledge
agreements, a deed of trust, a mortgage and certain other collateral
assignment agreements (collectively, the "Collateral Documents") providing for
the grant of a security interest in or pledge of the Collateral to the
Trustee, as collateral agent (in such capacity, the "Collateral Agent"), for
the benefit of the holders of the Notes. Such pledges and security interests
will secure the payment and performance when due of all of the obligations of
the Company and the Guarantors under the Indenture, the Guarantees and the
Notes as provided in the Collateral Documents. Such Liens shall be on a pari
passu basis with the Liens securing the Facility. The Trustee, on behalf of
the Noteholders, will enter into an intercreditor agreement with the
Administrative Agent under the Facility relating to the parties' respective
rights to collateral and certain other matters (the "Intercreditor
Agreement").
The Collateral Documents set forth provisions under which the Collateral
Agent will be entitled to foreclose on the Collateral following an Event of
Default. Holders of the Notes may not enforce the Collateral Documents.
Subject to certain limitations, holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power under the Collateral Documents. Upon the full and final payment and
performance of all obligations of the Company under the Indenture and the
Notes, the Collateral Agreements shall terminate and the Collateral shall be
released. In addition, the Indenture and the Collateral Documents provide
that, if the Liens under the Facility on any Collateral are released, the
Collateral Agent will release the Liens on such Collateral under the
Collateral Documents, provided, that (i) if such Disposition is not a
Permitted Disposition, a pro rata amount of proceeds may be required to be
offered to redeem Notes, either at the time of such release or thereafter (see
"--Special Asset Sales" below), (ii) pari passu liens securing the Notes will
be required on any proceeds or substitute Collateral securing the Facility and
(iii) the Collateral Agent shall have received all documentation required by
the Trust Indenture Act therefor.
At the Company's option, the Liens securing the Notes and Guarantees will be
released on the date (the "Collateral Release Date") the Company delivers
notice to the Collateral Agent requesting such release and including letters
from Moody's and Standard & Poor's indicating that the unsecured Notes and
Facility receive investment grade ratings from both such entities and such
release of Collateral will not result in a reduction below the respective
rating issued by either such entity as of the date of issuance of the Notes
and a letter from the Administrative Agent under the Facility confirming that
the Liens securing the Facility will be released contemporaneous with the
release of the Liens securing the Notes and Guarantees.
The right of the Collateral Agent to realize upon and sell the Collateral is
likely to be significantly impaired by applicable bankruptcy and insolvency
laws if a proceeding under such laws were commenced in respect of the Company
or any Guarantor. Such laws may impose limitations or prohibitions on the
exercise of rights and remedies under the Collateral Agreements for a
substantial or indefinite period of time. In any foreclosure sale, licensing
requirements under the Nevada Gaming Laws may limit the number of potential
bidders and may delay the sale of the Collateral, either of which could
adversely affect the sale price of the Collateral. In addition, the sale,
disposition or distribution of Collateral consisting of slot machines or other
gaming devices is subject to the prior approval of the Nevada Board. See
"Regulation and Licensing--Nevada." During the pendency of any foreclosure
proceeding, the Collateral Agent could seek the appointment of a receiver
through a petition to the appropriate Nevada state court for the taking of
possession of the Collateral. The receiver may be required to obtain the
approval of Nevada Gaming Authorities to continue gaming operations until the
foreclosure sale. If the Collateral Agent acquired the Collateral in a
foreclosure sale, it may contract for the operation of the Collateral by an
independent operator who would be required to comply with the licensing
requirements and other restrictions imposed by the Nevada Gaming Authorities,
pursuant to an arrangement under which the holders of the Notes would not
share in the profits or losses of gaming operations. In addition, if the
Collateral Agent acquires and operates the Collateral, the Collateral Agent
and the holders of the Notes will, if they share in the profits and losses,
and may, in any event, be required to comply with the licensing requirements
under the Nevada Gaming Laws.
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ADDITIONAL COVENANTS OF THE COMPANY
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus for a description of certain covenants
applicable to the Notes. In addition to the foregoing, the following covenants
of the Company will apply to the Notes for the benefit of the holders of the
Notes:
Limitation on Liens. The Indenture will provide that the Company will not,
and will not permit any Subsidiary (other than any Excluded Subsidiary) to,
create, incur, issue, assume or guarantee any Indebtedness of the Company or
any Subsidiary secured by a Lien upon any Principal Property, or upon shares
of capital stock or evidences of Indebtedness issued by any such Subsidiary
which owns or leases a Principal Property and which are owned by the Company
or any such Subsidiary (whether such Principal Property, shares or evidences
of Indebtedness are now owned or are hereafter acquired by the Company),
without making effective provision to secure all of the Notes or Guarantees,
as the case may be, then outstanding by such Lien, equally and ratably with
(or prior to) any and all other Indebtedness thereby secured, so long as such
Indebtedness shall be so secured.
The foregoing restrictions shall not apply, however, to: (a) Liens existing
on the date of original issuance of the Notes; (b) Liens affecting property of
a corporation or other entity existing at the time it becomes a Subsidiary of
the Company or at the time it is merged into or consolidated with the Company
or a Subsidiary of the Company (provided that such Liens are not incurred in
connection with, or in contemplation of, such entity becoming a Subsidiary or
such merger or consolidation and do not extend to or cover any property or
assets of the Company, or any Guarantor other than the property of the entity
so acquired); (c) Liens on property existing at the time of acquisition
thereof or incurred to secure payment of all or a part of the purchase price
thereof or to secure indebtedness incurred prior to, at the time of or within
24 months after the acquisition for the purpose of financing all or part of
the purchase price thereof (provided that such Liens do not extend to or cover
any property or assets of the Company, or any Guarantor other than the
property so acquired); (d) Liens to secure Indebtedness of limited liability
companies, joint ventures, partnerships or corporations which are less than
wholly-owned by the Company and for its subsidiaries ("Non-Wholly Owned
Entities"), to the extent such Liens are solely on property or assets of, or
equity interests in, such Non-Wholly Owned Entities; and (e) any extension,
renewal, replacement or refunding of any Lien referred to in the foregoing
clauses (a) through (d), provided, however, that the aggregate principal
amount of Indebtedness secured thereby and not otherwise authorized by the
foregoing clauses shall not exceed the aggregate principal amount of
Indebtedness, plus any premium or a payable in connection with any such
extension, renewal, replacement or refunding, so secured at the time of such
extension, renewal, replacement or refunding.
Notwithstanding the foregoing, the Company and such Subsidiaries may create,
incur, issue, assume or guarantee Indebtedness secured by Liens without
equally and ratably securing the Notes then outstanding, provided, that at the
time of such creation, incurrence, issuance, assumption or guarantee, after
giving effect thereto and to the retirement of any Indebtedness which is
concurrently being retired, the aggregate amount of all outstanding
Indebtedness secured by Liens so incurred (other than those Liens permitted by
the preceding paragraph), together with all outstanding Attributable Value of
all sale and leaseback transactions permitted by the last paragraph under
"Limitation on Sale and Leaseback Transactions" below, does not exceed 15% of
the Consolidated Net Tangible Assets of the Company.
The Indenture will also provide that, prior to the Collateral Release Date,
the Company will not, and will not permit any Subsidiary to, (i) create, incur
or suffer to exist any Lien upon any of their properties or assets (including
without limitation capital stock) that secures the Facility, without making
effective provision to secure all of the Notes and Guarantees then outstanding
by such Lien, equally and ratably with (or prior to) the Facility, so long as
the Facility shall be so secured or (ii) create, acquire or have any
Subsidiary that is not an Excluded Subsidiary without making effective
provision for such Subsidiary to become a Guarantor under the Indenture.
Limitation on Sale and Leaseback Transactions. The Indenture will provide
that, after the Collateral Release Date, sale and leaseback transactions by
the Company or any Subsidiary (other than any Excluded Subsidiary) involving
any Principal Property are prohibited unless the Company or such Subsidiary
shall apply,
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or cause to be applied, to the retirement of its secured debt within 120 days
after the effective date of the sale and leaseback transaction, an amount not
less than the greater of (i) the Net Proceeds of the sale of the Principal
Property leased pursuant to such arrangement or (ii) the fair market value of
the Principal Property so leased. This restriction will not apply to a sale
and leaseback transaction involving the taking back of a lease for a period of
less than three years. Any portion of such proceeds remaining after retirement
of all secured debt of the Company or such Subsidiary shall be released from
the restrictions described in this paragraph.
Notwithstanding the restrictions described above, the Company or any such
Subsidiary may enter into a sale and leaseback transaction without being
subject to the requirements of the immediately preceding paragraph, provided,
that at the time of such transaction, after giving effect thereto, the
Attributable Value thereof, together with all Indebtedness secured by Liens
permitted pursuant to the Indenture as described above under "Limitation on
Liens" (other than those Liens permitted by the second paragraph under
"Limitation on Liens" above, and other than the Attributable Value of the sale
and leaseback transactions permitted by the preceding paragraph) does not
exceed 15% of the Consolidated Net Tangible Assets of the Company or if the
sale and leaseback transaction would be a Permitted Disposition.
Special Asset Sales. The Indenture will provide that, prior to the
Collateral Release Date, the Company will not, and will not permit any of its
Subsidiaries (other than any Excluded Subsidiary) to, consummate any
Disposition of Collateral that is not a Permitted Disposition ( a "Special
Asset Sale") unless (i) no Default or Event of Default exists or is continuing
immediately prior to or after giving effect to such Special Asset Sale; (ii)
the Company (or the Subsidiary, as the case may be) receives consideration at
the time of such Special Asset Sale at least equal to the fair value
(evidenced by an Officers' Certificate delivered to the Trustee) of the assets
sold or otherwise disposed of and (iii) at least 80% of the consideration
therefor received by the Company or such Subsidiary is in the form of Cash
Equivalents; provided that (x) the amount of any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the notes
thereto) of the Company or any Subsidiary (other than liabilities that are by
their terms subordinated to the Notes or any Guarantee thereof) that are
assumed by the transferee of any such assets, (y) the amount of any notes or
other obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary
into cash or as to which the Company or such Subsidiary has received at or
prior to the consummation of the Special Asset Sale a commitment from a
nationally recognized investment, merchant or commercial bank to convert into
cash within 90 days of the consummation of such Special Asset Sale unless not
actually converted into cash within such 90-day period (to the extent of the
cash received or receivable pursuant to any such commitment) and (z) an amount
equal to the fair value (evidenced by an Officers' Certificate delivered to
the Trustee) of operating assets to be used or useful in the business of the
Company or any Subsidiary with respect to which the Trustee has received a
first priority fully perfected security interest will be deemed to be Cash
Equivalents for purposes of this provision. For purposes of the following
paragraph and clause (iii) of this paragraph, an Event of Loss suffered by the
Company or any of such Subsidiaries shall constitute a Special Asset Sale and
the Company will be required to apply the Net Proceeds from such Event of Loss
as set forth below.
Prior to the Collateral Release Date and subject to the first sentence of
the next paragraph, within 24 months after the receipt of any Net Proceeds
from any Special Asset Sale (including from an Event of Loss), the Company or
any such Subsidiary may (i) apply an amount equal to such Net Proceeds to (a)
the making of capital expenditures or the acquisition of tangible assets, in
each case, that is used or useful in any business of the Company or such
Subsidiary, and/or (b) acquisitions of publicly traded securities of gaming,
hotel or related companies upon consummation of which the Trustee will have
received a fully perfected security interest (pari passu with (or prior to)
Liens securing the Facility) in the property, securities or assets acquired by
the Company or such Subsidiary in connection therewith, (ii) contractually
commit to apply such Net Proceeds to the payment of either the purchase price
of publicly traded securities of gaming, hotel or related companies or the
costs of construction of real property improvements of property used or useful
in any business of the Company or such Subsidiary or (iii) segregate a portion
of such Net Proceeds as a reserve account against budgeted costs of
construction of real property improvements of any property used or useful in
any business of the Company or such Subsidiary provided construction of such
improvements has begun at the time of such segregation, in each
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case with respect to which the Trustee will have received or retained a fully
perfected security interest (pari passu with (or prior to) Liens securing the
Facility). Pending the final application (which, for purposes of clause
(ii) and (iii) of the preceding sentence shall be deemed to occur upon payment
of such Net Proceeds pursuant to the contractual commitment or for such
budgeted costs referred to therein) of any such Net Proceeds, the Company will
invest such Net Proceeds in Cash Equivalents held in an account in which the
Trustee shall have a security interest (pari passu with (or prior to) Liens
securing the Facility); provided that, pending such final application (and
without reducing the required amount of such final application), the Company
may obtain a release from such invested Cash Equivalents to repay revolving
loans under the Facility, in an aggregate amount that does not include any of
the Pro Rata Amount of Net Proceeds and provided that the interests of the
Administrative Agent on behalf of the Facility in the remaining Cash
Equivalents are correspondingly reduced. A Pro Rata Amount of any Net Proceeds
from Special Asset Sales that are not applied, segregated or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds."
Notwithstanding the foregoing paragraphs, if prior to the Collateral Release
Date a Special Asset Sale occurs that results in a repayment of obligations
under the Facility while a default exists thereunder (without regard to any
waiver of defaults that may be given in connection with such repayment) or
results in a reduction in aggregate commitments under the Facility, a Pro Rata
Amount of Net Proceeds from such Special Asset Sale will be deemed to
constitute "Excess Proceeds" upon such repayment or reduction.
When the aggregate amount of Excess Proceeds exceeds $25.0 million, the
Company will be required to make an offer to all holders of Notes to purchase
Notes (an "Asset Sale Offer"), in an amount equal to the maximum principal
amount of Notes that may be prepaid, purchased or redeemed out of the Excess
Proceeds (less the amount of any optional redemption (see "Optional
Redemption" above) made by the Company after such Asset Sale and before such
Asset Sale Offer that has not otherwise reduced any calculation of Excess
Proceeds), at a price in cash equal to 100% of the principal amount thereof,
plus accrued and unpaid interest to the date of repurchase (plus any
additional amount as would be payable if such offer were made as an optional
redemption), in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate amount of Notes is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes in such manner as it shall deem fair and appropriate. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero. If the Collateral Release Date occurs, any pledged Collateral
shall be released and any obligation to make an Asset Sale Offer shall
terminate.
The Company will comply with the requirements of Rule 14e-1 promulgated
under the Exchange Act and any other securities law and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes pursuant to any mandatory purchase offer.
Prior to the Collateral Release Date, the Company also will not, and will
not permit any Subsidiary to, directly or indirectly, sell any capital stock
of a Guarantor except pursuant to a sale of all of the capital stock of such
Guarantor or issue any capital stock of any Guarantor to any person other than
the Company or another Guarantor.
SUPPLEMENTAL EVENTS OF DEFAULT
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus for a description of events of default
applicable to the Notes under the Indenture. In addition to such events of
default, the following events shall each constitute an event of default
applicable to the Notes under the Indenture: (i) failure of the Company or any
Guarantor to pay when due (after applicable grace periods as provided in any
applicable instrument governing such debt) the principal of, or acceleration
of, any Indebtedness by the Company or any Guarantor having an aggregate
principal amount outstanding equal to at least $25 million, if such
Indebtedness is not discharged, or such acceleration is not annulled, within
30 days after written notice as
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provided in the Indenture; (ii) entry of final judgments against the Company
or any Guarantor which remain undischarged for a period of 60 days, provided
that the aggregate of all such judgments exceeds $25 million and the judgments
remain undischarged for 60 days after notice and (iii) the occurrence of a
License Revocation (defined below) which continues for a period of more than
90 consecutive days.
SUPPLEMENTAL MODIFICATION OR WAIVER PROVISIONS
Reference is made to the section entitled "Modification or Waiver" in the
accompanying Prospectus for a description of provisions pertaining to
modifications or waivers of the Indenture. In addition to the other
modifications or waivers specified therein that require the consent of each
affected holder of the Notes, a release of any Guarantor (except in accordance
with the provisions of the Indenture or the Collateral Documents) requires the
consent of each affected holder of Notes. A release of all or substantially
all of the Collateral from the Lien of the Indenture or the Collateral
Documents (except in accordance with the provisions of the Indenture or
Collateral Documents) requires the consent of holders of not less than two-
thirds in principal amount of the outstanding Notes.
COMPLIANCE WITH GAMING LAWS
Each holder of a Note, by accepting any Note, shall be deemed to have agreed
to be bound by the requirements imposed on holders of debt securities of the
Company by the gaming authority of any jurisdiction of which the Company or
any of its subsidiaries conducts or proposes to conduct gaming activities. For
a description of the regulatory requirements applicable to the Company, see
"Regulation and Licensing" herein and "Business--Hotels and Gaming--Nevada
Government Regulation" and "Business--MGM Grand Atlantic City--New Jersey
Government Regulation" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 incorporated by reference herein.
CERTAIN DEFINITIONS
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus %.
"Administrative Agent" means Bank of America National Trust and Savings
Association, in its capacity as Administrative Agent under the Facility (and
its successors and assigns from time to time).
"Attributable Value" with respect to any sale and leaseback transaction that
is subject to the restrictions described under "--Limitation on Sale and
Leaseback Transactions" means the present value of the minimum rental payments
called for during the term of the lease (including any period for which such
lease has been extended), determined in accordance with generally accepted
accounting principles, discounted at a rate that, at the inception of the
lease, the lessee would have incurred to borrow over a similar term the funds
necessary to purchase the leased assets.
"Cash Equivalents" shall have the meaning set forth from time to time in the
Facility.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of such Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any
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successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such Business Day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations or (B) if the
Company obtains fewer than three such Reference Treasury Dealer Quotations,
the average of all such Quotations.
"Consolidated Net Tangible Assets" of the Company means the aggregate amount
of assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any Indebtedness
having a maturity of less than 12 months from the date of the most recent
consolidated balance sheet of the Company but which by its terms is renewable
or extendable beyond 12 months from such date at the option of the borrower)
and (b) all goodwill, trade names, patents, unamortized debt discount and
expense and any other like intangibles, all as set forth on the most recent
consolidated balance sheet of the Company and computed in accordance with
generally accepted accounting principles.
"Disposition" shall have the meaning set forth in the Facility as in effect
on the date hereof.
"Event of Loss" means, with respect to any property or asset, any loss,
destruction or damage of or to such property or asset, or any actual
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property or asset, if the sale of such property or asset,
for the amount attributable to such loss, destruction, damage, condemnation,
seizure or taking, would not be a Permitted Disposition.
"Excluded Subsidiary" means NY-NY, LLC, MGM Grand-Bally's Monorail Limited
Liability Company and MGM Grand Australia, Inc. and the Company's non-U.S.
subsidiaries and their U.S. holding companies, provided such holding companies
have no other assets or operations and provided that if any Excluded
Subsidiary becomes subject to the covenants in the Facility applicable to
Restricted Subsidiaries or grants any Liens to secure the Facility, such
Excluded Subsidiary will thereafter not be an Excluded Subsidiary.
"Facility" means the Amended and Restated Loan Agreement dated as of July
17, 1997 among the Company, MGM Grand Atlantic City, Inc., the banks, managing
agents and co-agents therein named therein and the Administrative Agent (and
their successors and assigns from time to time party thereto), including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, in each case as amended, modified, renewed,
extended, refunded, replaced or refinanced from time to time.
"Indebtedness" means notes, bonds, debentures or other similar evidences of
indebtedness for borrowed money or any guarantee of any of the foregoing.
"License Revocation" means the revocation, failure to renew or suspension
of, or the appointment of a receiver, supervisor or similar official with
respect to, any casino, gambling or gaming license issued by any Gaming
Authority covering MGM Grand Las Vegas, or, after the completion date for any
Material Project, each Guarantor which owns any material portion of that
Material Project.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest, in each case to secure payment of Indebtedness.
"Material Project" means, as of each date of determination, (a) the MGM
Grand-Atlantic City, and (b) each other casino, hotel and/or entertainment
complex project proposed by Borrower or any Guarantor which at that date has a
development and capital expenditure budget in excess of $250,000,000.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Special Asset Sale or Event of Loss
(including without limitation any cash received upon the sale or other
disposition of any non-cash consideration received in any Special Asset Sale
or Event of Loss and insurance proceeds), net of the direct costs relating to
such Special Asset Sale or Event of Loss (including
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without limitation legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to
be applied to the repayment of Indebtedness (other than the Facility) secured
by a Lien on the asset or assets that were the subject of such Special Asset
Sale and any reserve established by the Company or any of its Subsidiaries in
accordance with generally accepted accounting principles against any
liabilities associated with such Special Asset Sale and retained by the
Company or any of its Subsidiaries, as the case may be, after such Special
Asset Sale.
"Permitted Disposition" means a Disposition of the type that is permitted
under Section 6.2 of the Facility as in effect on the date hereof, without
regard to any waiver by the lenders under the Facility of any default or event
of default that exists or would result from such Disposition.
"Principal Property" means any real estate or other physical facility or
depreciable asset or securities acquired with the proceeds of Special Asset
Sales, the net book value of which on the date of determination exceeds the
greater of $25 million or 2% of the Consolidated Net Tangible Assets of the
Company.
"Pro Rata Amount" means, with respect to any Special Asset Sale, the amount
of Net Proceeds from such Asset Sale multiplied by a fraction, the numerator
of which is the aggregate amount of outstanding obligations under the Notes
and the Indenture immediately before such Asset Sale and the denominator of
which is the sum of the numerator plus the aggregate amount of outstanding
obligations under the Facility immediately before such Asset Sale.
"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Company and certified to the Trustee by the Company.
"Reference Treasury Dealer" means each of BancAmerica Robertson Stephens,
Deutsche Morgan Grenfell and CIBC Oppenheimer and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary
U.S. Government Securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury
Dealer and certify same to the Trustee; and any other Primary Treasury Dealer
selected by the Company and certified to the Trustee by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Company and certified to the Trustee by the Company, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Company by such
Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding
such redemption date.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation is, at the time, directly or
indirectly, owned by the Company or by one or more Subsidiaries thereof, or by
the Company and one or more Subsidiaries.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form of
one or more Registered Notes in global form (the "Global Notes"). Each Global
Note will be deposited on the date of the closing of the sale of the Notes
(the "Closing Date") with, or on behalf of, DTC, as depositary (the
"Depositary"), and registered in the name of Cede & Co., as nominee of the
Depositary.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its
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participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of the securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit
the accounts of participants designated by the Underwriters with an interest
in the applicable Global Notes and (ii) ownership of the Notes evidenced by
the Global Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the Depositary (with respect
to the interests of Participants), the Participants and the Indirect
Participants. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own and that
security interests in negotiable instruments can only be perfected by delivery
of certificates representing the instruments. Consequently, the ability to
transfer Notes evidenced by the Global Notes will be limited to such extent.
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by the Global Notes for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of Notes in certificated form ("Certificated
Notes"), and will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. As a result,
the ability of a person having a beneficial interest in Notes represented by a
Global Note to pledge such interest to persons or entities that do not
participate in the Depositary's system, or to otherwise take actions with
respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of Notes by the Depositary, or for maintaining, supervising or
reviewing any records of the Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on,
any Note represented by a Global Note registered in the name of the Depositary
or its nominee on the applicable record date will be payable by the Trustee
to, or at the direction of, the Depositary or its nominee in its capacity as
the registered holder of the Global Note representing such Notes under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Notes (including
principal, premium, if any, or interest), or to immediately credit the
accounts of the relevant Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Global Note as shown on the records of the Depositary.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Notes will be governed by standing instructions and customary
practice and will be the responsibility of the Participants or the Indirect
Participants.
S-26
Certificated Notes
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Notes in certificated form under the Indenture, then, upon surrender by the
Depositary of the applicable Global Notes, Certificated Notes will be issued
to each person that the Depositary identifies as the beneficial owner of the
Notes represented by such Global Notes. In addition, subject to certain
conditions, any person having a beneficial interest in a Global Note may, upon
request to the Trustee, exchange such beneficial interest for Notes in the
form of Certificated Notes. Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may
conclusively rely on, and shall be protected in relying on, instructions from
the Depositary for all purposes (including with respect to the registration
and delivery, and the respective principal amounts, of the Notes to be
issued).
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable. The Company will have no responsibility for the
performance by the Depositary or its Participants of their respective
obligations as described hereunder or under the rules and procedures governing
their respective operations.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters (as defined
herein) in immediately available funds. Payments in respect of the Notes
represented by the Global Notes (including principal, premium, if any, and
interest) will be made in immediately available funds to the accounts
specified by the Depositary. With respect to Notes represented by Certificated
Notes, the Company will make all payments of principal, premium, if any, and
interest, by mailing a check to the registered address of each holder of such
Notes. The Notes will trade in the Depositary's Same-Day Funds Settlement
System until maturity, or until the Notes are issued in certificated form, and
secondary market trading activity in the Notes will therefore be required by
the Depositary to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds
on trading activity in the Notes.
S-27
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
consequences expected to result from the purchase, ownership and disposition
of the Notes by holders acquiring the Notes on original issue for cash. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), applicable Treasury regulations, judicial authority
and administrative rulings and practice, any of which may be altered with
retroactive effect thereby changing the Federal income tax consequences
discussed below. There can be no assurance that the Internal Revenue Service
("IRS") will not take a contrary view, and no ruling from the IRS has been or
will be sought.
The tax treatment of a holder of Notes may vary depending upon such holder's
particular situation. Certain holders (including, but not limited to, certain
financial institutions, insurance companies, broker-dealers, foreign
corporations, nonresident alien individuals and persons holding the Notes as
part of a "straddle," "hedge" or "conversion transaction") may be subject to
special rules not discussed below. This discussion is limited to holders who
will hold the Notes as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER
TAX LAWS.
RECOGNITION OF INTEREST INCOME
A holder of Notes will recognize interest income with respect to the Notes
at the time it is received or accrued depending upon the holder's normal
method of accounting.
SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION
In general, a holder of a Note will recognize gain or loss upon the sale,
retirement or other taxable disposition of such Note in an amount equal to the
difference between (i) the amount of cash and the fair market value of
property received in exchange therefor (except to the extent attributable to
the payment of accrued interest, which generally will be taxable to a holder
as ordinary income) and (ii) the holder's adjusted tax basis in such Note. A
holder's tax basis in a Note generally will be equal to the price paid for
such Note. Any gain or loss recognized on the sale, retirement, or other
taxable disposition of a Note generally will be capital gain or loss. The
capital gain or loss will be midterm if the Note had been held for more than
12 months and long term if the Note had been held for more than 18 months.
BACKUP WITHHOLDING
A holder of Notes may be subject to backup withholding at the rate of 31%
with respect to interest paid on, and gross proceeds from a sale of, the Notes
unless (i) such holder is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A holder of Notes who does not provide the
Company with his or her correct taxpayer identification number may be subject
to penalties imposed by the IRS.
The Company will report to the holders of the Notes and the IRS the amount
of any "reportable payments" (including any interest paid or accrued on the
Notes) and any amount withheld with respect to the Notes during the calendar
year.
ACQUISITION PREMIUM
In general, a Holder that purchases a Note for an amount over the face
amount of the Note has the option of (a) amortizing the amount of the premium
until maturity of the Note and correspondingly reducing the Holder's basis in
the Note by the amortized amount, or (b) treating the amount of the premium as
part of the basis of the Notes.
S-28
MARKET DISCOUNT
In general, a Note will be treated as purchased at a market discount (a
"Market Discount Note") if the amount for which a Holder purchased the Note is
less than the Note's issue price. Generally, the issue price of a Note will be
the first price at which a substantial amount of Notes included in the issue
of which the Note is a part is sold to other than bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents, or wholesalers. Any gain recognized on the maturity or
disposition of a Market Discount Note will be treated as ordinary income to
the extent that such gain does not exceed the market discount on such Note.
Alternatively, a Holder of a Market Discount Note can elect to include the
market discount ratably in income.
S-29
UNDERWRITING
Subject to the terms and conditions set forth in the purchase agreement (the
"Underwriting Agreement"), the Company has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of such Underwriters
has severally agreed to purchase, the principal amount of the Notes set forth
opposite its name below.
PRINCIPAL
UNDERWRITER AMOUNT
----------- -----------
BancAmerica Robertson Stephens..................................... $
Deutsche Morgan Grenfell Inc.......................................
CIBC Oppenheimer Corp..............................................
-----------
Total............................................................ $
===========
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to
exceed % of the principal amount of the Notes to certain brokers and
dealers. After the Notes are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend
to make a market in the Notes but they are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Notes.
The Underwriters may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Exchange Act. Rule 104
permits stabilizing bids to purchase the security so long as bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases
of Notes in the open market after the distribution has been completed in order
to cover syndicate short positions. Stabilizing and syndicate covering
transactions may cause the price of the Notes to be higher than it would
otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
Certain legal matters relating to the issuance and sale of the Notes will be
passed upon for the Company by Christensen, Miller, Fink, Jacobs, Glaser, Weil
& Shapiro, LLP, Los Angeles, California. Certain legal matters relating to the
offering will be passed upon for the Underwriters by Gibson, Dunn & Crutcher
LLP, Los Angeles, California. Certain legal matters with respect to Nevada law
will be passed upon by Lionel Sawyer & Collins, Las Vegas, Nevada and with
respect to New Jersey law by Sterns & Weinroth, A Professional Corporation,
Atlantic City, New Jersey.
S-30
PROSPECTUS
$600,000,000
MGM GRAND, INC.
DEBT SECURITIES AND COMMON STOCK
----------------
MGM Grand, Inc., a Delaware corporation ("MGM Grand" or the "Company"), may
offer from time to time (i) one or more series of its debt securities,
consisting of debentures, notes, bonds or other evidences of indebtedness (the
"Debt Securities"), and (ii) shares of the Company's Common Stock, par value
$0.01 (the "Common Stock"). In addition, up to 618,557 shares of Common Stock
may be offered and sold from time to time by a stockholder of the Company who
holds such shares in trust (the "Trustee Stockholder"). See "Trustee
Stockholder" and "Plan of Distribution." The Debt Securities and shares of
Common Stock offered by the Company and the Selling Trustee Stockholder herein
(collectively, the "Offered Securities") may be offered, separately or
together, in separate series, in amounts, at prices and on terms to be
determined at the time of the offering and to be set forth in one or more
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: in the case of Common Stock,
the aggregate number of shares offered, the offering price and the terms of
the offering and sale thereof; and in the case of Debt Securities, the
specific title, series, aggregate principal amount, maturity, interest rate
(or manner of calculation thereof) and time of payment of interest, form
(which may be certificated or global), authorized denominations, terms for
redemption at the option of the Company or repayment at the option of the
holder, terms for sinking fund payments, guarantees by subsidiaries of the
Company, covenants and the initial public offering price.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE NEW JERSEY CASINO CONTROL COMMISSION NOR ANY OTHER GAMING AUTHORITY HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT
MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
----------------
The Company and the Trustee Stockholder may sell all or a portion of any
offering of its Offered Securities directly, through agents designated from
time to time, or to or through underwriters or dealers. If any agents or
underwriters are involved in the sale of any of the Offered Securities, their
names and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable
from the information set forth, in the applicable Prospectus Supplement. See
"Plan of Distribution." No Offered Securities may be sold without delivery of
the applicable Prospectus Supplement describing the method and terms of the
offering of such Offered Securities.
----------------
The date of this Prospectus is August 4, 1997
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
OFFERED SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
OR IN THE AFFAIRS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES SINCE THE
RESPECTIVE DATES OF THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at its Chicago Regional Office at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and at its New York
Regional Office at 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such materials can be obtained upon written request from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Commission
also maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission. The Company's Common Stock is
listed on the New York Stock Exchange. Copies of such reports, proxy
statements and other information can also be inspected and copied at the
offices of the New York Stock Exchange, Inc., at 20 Broad Street, New York,
New York 10005.
This Prospectus constitutes part of a Registration Statement on Form S-3
(including all amendments and exhibits, the "Registration Statement") filed by
the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain items of which
are contained in schedules and exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. Reference is hereby
made to the Registration Statement and the exhibits thereto for further
information with respect to the Company. Any statements contained herein
concerning the provisions of any contract, agreement or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract, agreement or other document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. For further
information, reference is made to the Registration Statement, including
exhibits and schedules thereto. The Registration Statement can be inspected
and copied at the Public Reference Room of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549.
2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein and specifically made a part hereof by
this reference: (i) the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996; (ii) the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997; (iii) the Company's Proxy
Statement dated March 28, 1997; and (iv) the description of the Common Stock
which is contained in the Company's Registration Statement on Form 8-A dated
April 20, 1988. In addition, all documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the Offered
Securities made hereby shall be deemed to be incorporated by reference into
this Prospectus and to be part hereof from the respective dates of filing of
such documents with the Commission. Any statement contained herein or in any
Prospectus Supplement or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any Prospectus Supplement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to each
person to whom this Prospectus is delivered, upon written or oral request, a
copy of any or all of the documents that are incorporated herein by reference,
other than exhibits to such documents not specifically incorporated by
reference therein. Such requests should be addressed to Secretary/Treasurer,
MGM Grand, Inc., P.O. Box 98655, Las Vegas, Nevada 89193, telephone (702) 891-
3333.
----------------
3
THE COMPANY
MGM Grand is an entertainment, hotel and gaming company headquartered in Las
Vegas, Nevada. Through subsidiaries, the Company owns and operates the MGM
Grand Hotel/Casino in Las Vegas ("MGM Grand Las Vegas") and the MGM Grand
Hotel/Casino in Darwin, Australia ("MGM Grand Australia"). The Company also
owns a 50% interest in, and is a joint operator of, the New York-New York
Hotel/Casino in Las Vegas ("New York-New York") and intends to construct and
operate a destination resort hotel/casino, entertainment and retail facility
in Atlantic City, New Jersey. In addition, the Company is actively pursuing
hotel/gaming business opportunities in Detroit, Michigan and in South Africa.
The Company was incorporated in the State of Delaware in January 1986. The
executive offices of the Company are located at 3799 Las Vegas Boulevard
South, Las Vegas, Nevada 89109. The Company's mailing address is P.O. Box
98655, Las Vegas, Nevada 89193, and its telephone number is (702) 891-3333.
CREDIT FACILITY
In May 1997, the Company redeemed $473 million aggregate principal amount of
secured debt obligations of one of its wholly owned subsidiaries MGM Grand
Hotel Finance Corp.
On July 23, 1997, the Company amended, restated and extended its bank credit
facility to provide for a $1.25 billion senior revolving credit facility (the
"Facility"). The following summary of certain provisions of the Facility,
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, is qualified in its entirety by reference to all of the
provisions of the Facility. Capitalized terms used herein and not otherwise
defined in this Prospectus have the meanings ascribed to them in the Facility.
The Facility will be available: (i) to finance capital improvements at MGM
Grand Las Vegas in accordance with the Company's master plan with respect to
that property (up to $850 million); (ii) to fund development costs for MGM
Grand Atlantic City and the proposed project in Detroit, Michigan (up to $1.0
billion and up to $750 million, respectively); and (iii) for general corporate
purposes, including repurchases of the Company's Common Stock, investments in
qualified investments and other capital expenditures (up to $750 million).
Availability under the Facility will decline in quarterly increments of the
greater of $62.5 million or 5% of the commitment amount under the Facility,
commencing on December 31, 2001, with the balance due on December 31, 2002.
The Company may request one-year extensions, subject to the consent of the
Lenders, which would have the effect of deferring scheduled reductions in
availability.
Interest on outstanding balances and commitment fees on unutilized
availabilities under the Facility will be determined pursuant to a formula
based either on the Company's Leverage Ratio (the ratio of Total Debt to
Annualized Cash Flow) or the Facility Rating (the rating then applicable to
the Facility whether senior secured or senior unsecured), and in the case of
interest rates, pursuant to the Eurodollar or base rate prevailing from time
to time. Total Debt is defined under the Facility as the average of the
principal amount of the Company's funded debt outstanding on the last day of
each of the three calendar months in the fiscal quarter being measured,
excluding Indebtedness of New York-New York, except to the extent the Company
is required pursuant to generally accepted accounting principles to reflect
such Indebtedness in its balance sheet. Annualized Cash Flow is defined as the
aggregate (without duplication) for the prior four fiscal quarters of the
Company's EBITDA, increased by pre-opening expenses and EBITDA of New York-New
York to the extent distributable in cash to the Company and its Subsidiaries
whether or not distributed. As the Company's Leverage Ratio declines, the
interest rate and commitment fees will also decline. The Company will also pay
certain underwriting and agency fees in connection with the Facility.
The Facility is unconditionally guaranteed by each of the Company's
subsidiaries (other than New York-New York, LLC, MGM Grand-Bally's Monorail
Limited Liability Company and MGM Grand Australia, Inc. and the Company's non-
U.S. subsidiaries and their U.S. holding companies, provided such holding
companies have no other assets or operations) and will initially be secured
by, among other things, substantially all of the assets of the Company
(including the stock of MGM Grand Hotel, Inc. and MGM Grand Atlantic City,
Inc., but
4
not the Company's interest in New York-New York or MGM Grand Australia and its
subsidiaries). The Facility can become unsecured, at the Company's option, if
the unsecured facility receives investment grade ratings from both Moody's and
Standard & Poor's.
The Facility contains certain financial and operating covenants customary
for such facilities, including limitations on additional debt, dividends,
mergers and asset sales and Capital Expenditures. It also restricts
acquisitions and similar transactions. As of July 23, 1997, approximately $8
million was outstanding under the Facility.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Offered Securities by
the Company will be used for general corporate purposes, which may include
financing the development and construction of new facilities, additions to
working capital, reductions of indebtedness of the Company and its
subsidiaries, financing of capital expenditures, potential acquisitions and
the repurchase by the Company of its Common Stock. Funds not immediately
required for such purposes may be invested in short-term investment grade
securities. The proceeds from the sale of any Common Stock by the Trustee
Stockholder will reduce the amount of Offered Securities available for sale by
the Company hereunder. A substantial portion of the proceeds from the sale of
any Common Stock by the Trustee Stockholder will be used to satisfy certain
obligations to the Company. See "Trustee Stockholder."
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated:
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
---- ----- ---- ---- ---- ------------
Ratio of Earnings to Fixed
Charges(1)(2)......................... 0.31 (0.54) 2.19 1.65 2.78 10.39
- --------
(1) For purposes of computing the foregoing ratios: (i)"Earnings" consist of
income from continuing operations before income taxes and fixed charges,
adjusted to exclude capitalized interest, and (ii) "Fixed Charges" consist
of interest, whether expensed or capitalized, amortization of debt
discount and issuance costs, the Company's proportionate share of the
interest cost of 50%-owned joint ventures (such as the limited liability
company which owns New York-New York) and the estimated interest component
of rental expense.
(2) For the years ended December 31, 1992 and 1993, earnings were inadequate
to cover fixed charges by coverage deficiencies of $26,151,000 and
$91,771,000, respectively.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of each indenture pursuant to which the
Debt Securities may be issued and to which any Prospectus Supplement may
relate. The particular terms of the Debt Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may not
apply thereto will be described in the Prospectus Supplement relating to such
Debt Securities.
The Debt Securities offered hereby will be issued under one or more
indentures, each dated as of a date on or before the issuance of the Debt
Securities to which it relates and in the form that has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part,
subject to such amendments or supplements as may be adopted from time to time.
Each such indenture (the "Indenture") will be entered into between the
5
Company, as obligor, and a trustee chosen by the Company (the "Trustee") and
qualified to act as such under the Trust Indenture Act of 1939, as amended
(the "TIA"), and any subsidiaries which will guarantee the Company's
obligations under the Indenture. The following summary of certain provisions
of the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all provisions of the Indenture,
including the definitions therein of certain terms which are not otherwise
defined in this Prospectus. The terms of the Indenture are also governed by
certain provisions contained in the TIA. Certain capitalized terms used below
but not defined herein have the meanings ascribed to them in the Indenture.
GENERAL
The Debt Securities will be direct obligations of the Company, which may be
secured or unsecured, and which may be subordinated indebtedness of the
Company or pari passu with the Facility. The Facility provides that unsecured
subordinated Debt Securities may be issued pursuant to the Indenture without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a Board
Resolution or as established in one or more indentures supplemental to the
Indenture. All Debt Securities of one series need not be issued at the same
time and, unless otherwise provided, a series may be reopened, without the
consent of the holders of the Debt Securities of such series, for issuances of
additional Debt Securities of such series.
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect
to such series. In the event that two or more persons are acting as Trustees
with respect to different series of Debt Securities, each such trustee shall
be a Trustee of a trust under the Indenture separate and apart from the trust
administered by any other Trustee thereunder, and, except as otherwise
indicated herein, any action described herein to be taken by the Trustee may
be taken by each such Trustee with respect to, and only with respect to, the
one or more series of Debt Securities for which it is Trustee under the
Indenture.
Reference is made to the Prospectus Supplement for the following terms of
each series of the Debt Securities in respect of which this Prospectus is
being delivered:
(i) the designation, aggregate principal amount and authorized
denominations of the series;
(ii) the issue price as a percentage of the principal amount at which the
series will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity or upon redemption thereof and the rate or
rates at which original issue discount ("OID") will accrue;
(iii) the date or dates on which the series will mature;
(iv) the rate or rates per annum, if any, at which the series will bear
interest;
(v) the times from which any interest will accrue, be payable and the
record dates pertaining thereto;
(vi) the place or places where the principal and interest, if any, on the
series will be payable;
(vii) any redemption or other special terms;
(viii) the Events of Default and covenants relating to the Debt
Securities which are in addition to, modify or delete those described
herein;
(ix) whether the Debt Securities will be issued in certificated or book-
entry form, and the denominations thereof;
(x) if applicable, the terms of any right to convert Debt Securities into
shares of Common Stock of the Company or other securities or property;
6
(xi) provisions, if any, for the defeasance or discharge of certain of
the Company's obligations with respect to such Debt Securities, which
provisions may be in addition to, in substitution for, or in modification
of (or any combination of the foregoing), the provisions of the Indenture;
(xii) the manner in which the amounts of payment of principal of,
premium, if any, or interest on such Debt Securities will be determined, if
such amounts may be determined by reference to an index based on a currency
or currencies other than that in which such Debt Securities are denominated
or designated to be payable or by reference to a commodity, commodity
index, stock exchange index or financial index;
(xiii) a discussion of any material and/or special United States federal
income tax considerations applicable to such Debt Securities;
(xiv) any depositaries, trustees, interest rate calculation agents,
exchange rate calculation agents or other agents with respect to the Debt
Securities other than those originally appointed;
(xv) whether such Debt Securities will be issued in the form of one or
more global securities and whether such global securities are to be
issuable in a temporary global form or permanent global form;
(xvi) the terms, if any, on which such Debt Securities will be
subordinate to other debt of the Company;
(xvii) any listing or intended listing of the Debt Securities on a
securities exchange;
(xviii) the provisions, if any, relating to any security provided for
such Debt Securities or any guarantee thereof;
(xix) the provisions, if any, relating to any guarantees of the Debt
Securities; and
(xx) any other terms of such Debt Securities, which other terms will not
be inconsistent with the provisions of the Indenture.
The Debt Securities may be sold at a discount below their principal amount.
Even if the Debt Securities are not issued at a discount below their principal
amount, such securities may, for United States federal income tax purposes, be
deemed to have been issued with OID because of certain interest payment or
other characteristics. Special United States federal income tax considerations
applicable to Debt Securities issued with OID will be described in more detail
in any applicable Prospectus Supplement. In addition, special United States
federal tax considerations or other restrictions or terms applicable to any
Debt Securities offered exclusively to foreigners or denominated in a currency
other than United States dollars will be set forth in a Prospectus Supplement
relating thereto.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into, or sell, assign, convey, transfer or lease its properties and assets
substantially in their entirety (computed on a consolidated basis) to, another
corporation, person or entity unless (i) either (a) in the case of a merger or
consolidation, the Company is the surviving person or (b) the successor or
transferee is a corporation organized under the laws of the United States, any
State thereof or the District of Columbia and expressly assumes, by
supplemental indenture, all of the obligations of the Company under the Debt
Securities and the Indenture, and (ii) immediately after such transaction no
Default or Event of Default shall exist.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless specified in the Prospectus Supplement, the Debt Securities of any
series shall be issuable only as Debt Securities in denominations of $1,000,
and any integral multiple thereof, and shall be payable only in U.S. dollars.
The Indenture also provides that Debt Securities of a series may be issuable
in global form. See "Global Securities."
Upon surrender for registration of transfer of any Registered Security of
any series at the office or agency of the Company maintained for such purpose,
the Company shall deliver, in the name of the designated transferee, one or
more new Debt Securities of the same series of like aggregate principal amount
of such denominations as are authorized for Debt Securities of such series and
of a like Stated Maturity and with like
7
terms and conditions. No service charge will be made for any transfer or
exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Company shall not be required (i) to register, transfer or exchange Debt
Securities of any series during a period beginning with the opening of
business 15 days before the day of the transmission of a notice of redemption
of Debt Securities of such series selected for redemption, and ending at the
close of business on the day of such transmission, or (ii) to register,
transfer or exchange any Debt Security so selected for redemption in whole or
in part, except the unredeemed portion of any Debt Security being redeemed in
part.
EVENTS OF DEFAULT
Events of Default defined in the Indenture with respect to Debt Securities
of any series are: (a) default in the payment of any interest upon any Debt
Security of that series when it becomes due and payable, and continuance of
such default for a period of 30 days; (b) default in the payment of principal
of or premium, if any, on any Debt Security of that series when due; (c), if
applicable, default in the deposit of any sinking fund payment, when and as
due in respect of any Debt Security of that series; (d) default in the
performance, or breach, of any covenant or warranty of the Company in the
Indenture (other than a covenant or warranty that has been included in the
Indenture solely for the benefit of a series of Debt Securities other than
that series), which default continues uncured for a period of 60 days after
written notice to the Company by the applicable Trustee or to the Company and
the applicable Trustee by the holders of at least 25% in principal amount of
the outstanding Debt Securities of that series as provided in the Indenture;
and (e) certain events of bankruptcy, insolvency or reorganization in respect
of the Company. The Prospectus Supplement may provide for any other Event of
Default with respect to Debt Securities of that particular series.
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, then in every such case the
applicable Trustee or the holders of not less than 25% in principal amount of
the outstanding Debt Securities of that series may, by a notice in writing to
the Company (and to the applicable Trustee if given by the holders), declare
to be due and payable immediately the principal (or if the Debt Securities of
that series are Discount Securities, such portion of the principal amount as
may be specified in the terms of that series) and premium, if any, of all Debt
Securities of that series. At any time after a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the holders of a majority in principal amount of the
outstanding Debt Securities of that series may, subject to the Company having
paid or deposited with such Trustee a sum sufficient to pay overdue interest
and principal which has become due other than by acceleration and certain
other conditions, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal and premium, if
any, with respect to Debt Securities of that series, have been cured or waived
as provided in the Indenture. For information as to waiver of defaults see the
discussion set forth below under "--Modification and Waiver." Reference is
made to the Prospectus Supplement relating to any series of Debt Securities
that are Discount Securities for the particular provisions relating to
acceleration of a portion of the principal amount of such Discount Securities
upon the occurrence of an Event of Default and the continuation thereof.
The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of outstanding Debt Securities, unless the Trustee receives indemnity
satisfactory to it against any loss, liability or expense. Subject to certain
rights of the Trustee, the holders of a majority in principal amount of the
outstanding Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Debt Securities of that series.
No holder of any Debt Security of any series will have any right to
institute any proceeding, judicial or otherwise with respect to the Indenture
or for the appointment of a receiver or trustee, or for any remedy under the
Indenture, unless such holder shall have previously given to the applicable
Trustee written notice of a
8
continuing Event of Default with respect to Debt Securities of that series and
the holders of at least 25% in principal amount of the outstanding Debt
Securities of that series shall have made written request, and offered
reasonable indemnity, to such Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the holders of a majority in
principal amount of the outstanding Debt Securities of that series a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. Notwithstanding the foregoing, the holder of any
Debt Security will have an absolute and unconditional right to receive payment
of the principal of, premium, if any, and any interest on such Debt Security
on or after the due dates expressed in such Debt Security and to institute
suit for the enforcement of any such payment.
The Indenture requires the Company, within 120 days after the end of each
fiscal year, to furnish to the Trustee a statement as to compliance with the
Indenture. The Indenture provides that the Trustee with respect to any series
of Debt Securities may withhold notice to the holders of Debt Securities of
such series of any Default or Event of Default (except a default in payment on
any Debt Securities of such series) with respect to Debt Securities of such
series if and so long as a committee of its Trust Officers, in good faith,
determines that withholding such notice is in the interest of the holders of
Debt Securities of such series.
MODIFICATION AND WAIVER
Without prior notice to or consent of any holder of any series of Debt
Securities, the Company and the applicable Trustee, at any time and from time
to time, may modify the Indenture for any of the following purposes: (i) to
evidence the succession of another corporation to the rights of the Company
and the assumption by such successor of the covenants and obligations of the
Company in the Indenture and in such series of Debt Securities in accordance
with the terms of the Indenture; (ii) to add to the covenants of the Company
for the benefit of the holders of such series of Debt Securities (and if such
covenants are to be for the benefit of less than all such series, stating that
such covenants are expressly being included solely for the benefit of such
series), or to surrender any right or power conferred in the Indenture upon
the Company; (iii) to add any additional Events of Default (and if such Events
of Default are to be applicable to less than all series, stating that such
Events of Default are expressly being included solely to be applicable to such
series); (iv) to add to, change or eliminate any of the provisions of the
Indenture, provided that any such addition, change or elimination will become
effective only when there is no outstanding Debt Security issued thereunder
which is entitled to the benefit of such provision and as to which such
modification would apply; (v) to secure such series of Debt Securities or to
provide that any of the Company's obligations under such series of Debt
Securities or the Indenture shall be guaranteed and the terms and conditions
for the release or substitution of such security or guarantee; (vi) to
supplement any of the provisions of the Indenture to such extent as is
necessary to permit or facilitate the defeasance and discharge of such series
of Debt Securities, provided that any such action will not adversely affect
the interests of the holders of Debt Securities of such series or any other
series of Debt Securities issued under the Indenture in any material respect;
(vii) to establish the form or terms of Debt Securities as permitted by the
Indenture; (viii) to evidence and provide for the acceptance of appointment
thereunder by a successor Trustee with respect to one or more series of Debt
Securities and to add to or change any of the provisions of the Indenture as
is necessary to provide for or facilitate the administration of the trusts
thereunder by more than one Trustee; (ix) to comply with the requirements of
the Commission in connection with qualification of the Indenture under the
TIA; or (x) to cure any ambiguity, to correct or supplement any provision in
the Indenture which may be defective or inconsistent with any other provision
therein, to eliminate any conflict between the terms of the Indenture and the
Debt Securities issued thereunder and the TIA or to make any other provisions
with respect to matters or questions arising under the Indenture which will
not be inconsistent with any provision of the Indenture; provided such other
provisions shall not adversely affect the interests of the holders of
outstanding Debt Securities, if any, of any series created thereunder prior to
such modification in any material respect.
With the written consent of the holders of not less than a majority in
principal amount of the outstanding Debt Securities of each series affected by
such modification voting separately, the Company and the applicable Trustee
may modify the Indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture
or of modifying in any manner the rights of the holders of
9
Debt Securities of such series, if any, under the Indenture; provided,
however, that such modifications may not, without the consent of the holder of
each outstanding Debt Security of each series affected thereby: (i) change the
Stated Maturity of any Debt Security or reduce the principal amount thereof or
the rate (or extend the time for payment) of interest thereon or any premium
payable upon the redemption thereof, or change the Stated Maturity of, or
reduce the amount of the principal of a Discount Security that would be due
and payable upon a declaration of acceleration of the Maturity thereof or
impair the right to institute suit for the enforcement of any such payment on
or after the due date thereof (including, in the case of redemption, on or
after the Redemption Date), or alter any redemption provisions in a manner
adverse to the holders of such series of Debt Securities; (ii) reduce the
percentage in principal amount of the outstanding Debt Securities of such
series, the consent of whose holders is required for any such amendment,
supplemental indenture or waiver provided for in the Indenture; (iii) if
applicable, adversely affect the right of such holder to convert any Debt
Security; (iv) modify any of the waiver provisions, except to increase any
required percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of
each outstanding Debt Security affected thereby; or (v) modify any provision
described in the applicable Prospectus Supplement as requiring the consent of
each affected holder of Debt Securities.
A modification which changes or eliminates any covenant or other provision
of the Indenture with respect to one or more particular series of Debt
Securities, or which modifies the rights of the holders of Debt Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under the Indenture of the holders of Debt Securities
of any other series.
The Indenture provides that the holders of not less than a majority in
aggregate principal amount of the then outstanding Debt Securities of any
series, by notice to the relevant Trustee, may on behalf of the holders of the
Debt Securities of such series waive any default and its consequences under
the Indenture, except (1) a continuing default in the payment of interest on,
premium, if any, or the principal of, any such Debt Security held by a
nonconsenting holder or (2) a default in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the holder
of each outstanding Debt Security of each series affected.
DEFEASANCE OF DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
Defeasance and Discharge. The Indenture provides that the Company may be
discharged from any and all obligations in respect of the Debt Securities of
any series (except for certain obligations to pay additional amounts, if any,
upon the occurrence of certain tax, assessment or governmental charge events
with respect to payments on such Debt Securities, to register the transfer or
exchange of Debt Securities of such series, to replace stolen, lost or
mutilated Debt Securities of such series, to maintain paying agencies and to
hold money for payment in trust) upon the irrevocable deposit with the
Trustee, in trust, of money and/or U.S. government obligations that, through
the payment of interest and principal in respect thereof in accordance with
their terms, will provide money in an amount, as certified by an Officers'
Certificate, sufficient to pay and discharge each installment of principal
(and premium, if any) and interest on, and any mandatory sinking fund payments
in respect of, the Debt Securities of such series on the dates such payments
are due. Such discharge may occur only if, among other things, the Company
shall have delivered to the Trustee an opinion of counsel or a ruling from the
United States Internal Revenue Service (an "IRS Ruling"), in either case to
the effect that holders of the Debt Securities of such series will not
recognize income, gain or loss for United States federal income tax purposes
as a result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants. Upon compliance with certain conditions, the
Company may omit to comply with certain restrictive covenants contained in the
Indenture (or, if provided for in the applicable Prospectus Supplement, any
other restrictive covenant relating to any series of Debt Securities provided
for in a Board Resolution or supplemental indenture which by its terms may be
defeased pursuant to the terms of such series of Debt Securities) and any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to any Debt Securities. The conditions include,
among others: the deposit with the Trustee of money and/or U.S. government
obligations that, through the payment of interest and principal in respect
thereof in accordance with their terms, will provide money in an amount, as
certified by an Officers' Certificate, sufficient to pay principal, premium,
if any, and interest on and any mandatory sinking fund payments
10
in respect of the Debt Securities of such series on the dates such payments
are due; and the delivery to the Trustee of an opinion of counsel or an IRS
Ruling to the effect that the holders of the Debt Securities of such series
will not recognize income, gain or loss for United States federal income tax
purposes as a result of such deposit and related covenant defeasance.
LIMITED LIABILITY OF CERTAIN PERSONS
The Indenture provides that no stockholder, incorporator, employee, officer
or director, as such, past, present or future of the Company or any successor
corporation or any of the Company's Affiliates shall have any personal
liability in respect of the obligations of the Company under the Indenture or
the Debt Securities by reason of his, her or its status as such stockholder,
incorporator, employee, officer or director.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
The Indenture provides that each holder and beneficial owner, by accepting
any of the Debt Securities subject thereto, shall be deemed to have agreed
that if the gaming authority of any jurisdiction of which the Company or any
of its subsidiaries conducts or proposes to conduct gaming requires that a
person who is a holder or the beneficial owner of the Debt Securities must be
licensed, qualified or found suitable under applicable gaming laws, such
holder or beneficial owner, as the case may be, shall apply for a license,
qualification or a finding of suitability within the required time period. If
such person fails to apply or become licensed or qualified or is found
unsuitable, the Company shall have the right, at its option, (i) to require
such person to dispose of its Debt Securities or beneficial interest therein
within 30 days of receipt of notice of the Company's election or such earlier
date as may be requested or prescribed by such gaming authority or (ii) to
redeem such Debt Securities at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
earlier of the redemption date or the date of the finding of unsuitability,
which may be less than 30 days following the notice of redemption if so
requested or prescribed by the applicable gaming authority or such lesser
amount as may be required by applicable law or by order of any gaming
authority. The Company shall notify the Trustee in writing of any such
redemption as soon as practicable. The Company shall not be responsible for
any costs or expenses any such holder may incur in connection with its
application for a license, qualification or a finding of suitability.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or other securities or property will be set
forth in the applicable Prospectus Supplement relating thereto. Such terms
will include the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Debt Securities.
GUARANTEE
The Indenture provides that one or more subsidiaries of the Company (each a
"Guarantor") may guaranty the performance and punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all obligations
of the Company under the Debt Securities of any series and the Indenture (a
"Guarantee"). The liability of any Guarantor under a Guarantee is independent
of and not in consideration of or contingent upon the liability of the Company
or any other party obligated under the Debt Securities or the Indenture, and a
separate action or actions may be brought or prosecuted against the Company or
any other party obligated under the Debt Securities or the Indenture whether
or not the Company or any other party obligated under the Debt Securities or
the Indenture is joined in any such action or actions. Such Guarantee,
however, will be limited to an amount not to exceed the maximum amount that
can be guaranteed by such Guarantor without rendering the Guarantee, as it
relates to such Guarantor, voidable under Section 548 of the Federal
Bankruptcy Code or any applicable provision of comparable state law.
The Guarantee of any Guarantor is a continuing guaranty and will remain in
full force and effect until payment in full of all of the guaranteed
obligations.
11
PAYMENT AND PAYING AGENTS
The Company covenants and agrees for the benefit of each series of Debt
Securities that it will duly and punctually pay the principal of, premium, if
any, and interest on the Debt Securities in accordance with the terms of the
Debt Securities and the Indenture.
The Company will maintain in each Place of Payment for such series an office
or agency where Debt Securities of that series may be presented or surrendered
for payment, where Debt Securities of that series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Debt Securities of that series and the Indenture
may be served.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global
Securities will be in registered form and may be issued in either temporary or
permanent form. The specific terms of the depositary arrangement with respect
to a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Company consists of 75 million shares of
Common Stock. There are 57,968,919 shares of Common Stock outstanding. Holders
of the Common Stock are entitled to dividends when and as declared by the
Company's Board of Directors. Holders have one vote per share and the right to
the net assets in liquidation after payment of any amounts due to creditors.
Holders are not liable for further calls or assessments by the Company. There
are no sinking fund or redemption provisions relating to the Common Stock. The
Common Stock has noncumulative voting rights, which means that the holders of
a majority of the shares voting for the election of directors can elect 100%
of the directors if they choose to do so.
The Company's Certificate of Incorporation provides that if and when the
Company shall become, and so long as the Company shall remain, a publicly
traded holding company as defined in the New Jersey Casino Control Act
(hereinafter "Act"), in accordance with the Act, all securities of the Company
shall be held subject to the condition that if a holder thereof is
disqualified by the New Jersey Casino Control Commission (the "New Jersey
Commission") pursuant to the Act ("Disqualified Holder"), such Disqualified
Holder shall dispose of his interest in the securities, including any Common
Stock, within 120 days (or such other time period required by the New Jersey
Commission) following the Company's receipt of notice (the "Notice Date") of
such Disqualified Holder. Promptly following the Notice Date, the Company is
required to deliver a copy of such written notice to the Disqualified Holder
by personal delivery, mail or any other reasonable means.
The Company's Certificate of Incorporation also provides that so long as the
Company holds (directly or indirectly) a license or franchise from a
governmental agency to conduct its business, which license or franchise is
conditioned upon some or all of the holders of the Common Stock possessing
prescribed qualifications, any and all shares of the Common Stock shall be
subject to redemption by the Company, at its sole option and in its sole
discretion, to the extent necessary to prevent the loss of such license or
franchise or to reinstate it. Any shares of the Common Stock redeemable
pursuant to such provision may be called for redemption immediately for cash,
property or rights, including securities of the Company or another
corporation, on not less than five (5) days notice to the holders thereof at a
redemption price equal to the average closing price of such stock on a
national securities exchange for the 45 trading days immediately preceding the
date of the redemption notice; or if such stock is not so traded, then the
average of the high and low closing bid price of the stock as quoted by the
National Association of Securities Dealers Automated Quotation system for such
45 trading day period; or if such stock is not so quoted, the redemption price
shall be determined in good faith by the Board of Directors.
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, LLC, 400 S. Hope Street, Los Angeles, California 90071.
12
TRUSTEE STOCKHOLDER
In May 1995, the Company and MGM Grand Hotel, Inc. entered into a Promotion
Agreement with Don King Productions, Inc. ("DKP"), pursuant to which, among
other things, MGM Grand Las Vegas obtained the exclusive right to present six
of Mike Tyson's fights. In addition, pursuant to the Promotion Agreement, the
Company made a non-interest bearing working capital advance of $15 million to
DKP and sold DKP 618,557 shares of Common Stock for an aggregate purchase
price of $15 million. Certain terms of the Promotion Agreement were amended by
a Trust Agreement dated as of October 23, 1996, pursuant to which record and
beneficial ownership (including all voting rights) of such shares were
assigned and transferred to the law firm of Lionel Sawyer & Collins, the
Trustee Stockholder, and the maturity date for the working capital advance was
extended to March 31, 1998. Under the Trust Agreement, the Company has the
right to determine whether and when such shares may be sold. The Trustee
Stockholder owns no shares of Common Stock other than the 618,557 shares
indicated in this Prospectus.
PLAN OF DISTRIBUTION
The Company and the Trustee Stockholder may sell the Offered Securities
being offered hereby: (i) directly to one or more purchasers; (ii) through
agents; (iii) through one or more dealers; (iv) through one or more
underwriters; or (v) through a combination of any such methods of sale. The
distribution of the Offered Securities pursuant to any applicable Prospectus
Supplement may be effected from time to time in one or more transactions
either: (i) at a fixed price or prices which may be changed; (ii) at market
prices prevailing at the time of sale; (iii) at prices related to such
prevailing market prices; or (iv) at negotiated prices.
Up to 618,557 shares of Common Stock may be offered and sold from time to
time by the Trustee Stockholder. The Prospectus Supplement relating to any
shares of Common Stock offered by the Trustee Stockholder will set forth the
number of shares of Common Stock offered, as well as the number of shares of
Common Stock and percentage of such class which will be owned by the Trustee
Stockholder upon completion of such offering.
Offers to purchase Offered Securities may be solicited directly by the
Company and/or the Trustee Stockholder. Offers to purchase Offered Securities
may also be solicited by agents designated by the Company and/or the Trustee
Stockholder from time to time. Any such agent, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, involved in the
offer or sale of the Offered Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the applicable Prospectus Supplement.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, the Company and/or the Trustee Stockholder
will sell such Offered Securities to the dealer, as principal. The dealer, who
may be deemed to be an "underwriter" as that term is defined in the Securities
Act, may then resell such Offered Securities to the public at varying prices
to be determined by such dealer at the time of resale.
If an underwriter is, or underwriters are, utilized in the sale, the Company
and/or the Trustee Stockholder will execute an underwriting agreement with
such underwriters at the time of sale to them and the names of the
underwriters will be set forth in the applicable Prospectus Supplement, which
will be used by the underwriters to make resales of the Offered Securities in
respect of which this Prospectus is delivered to the public. In connection
with the sale of Offered Securities, such underwriters may be deemed to have
received compensation from the Company and/or the Trustee Stockholder in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of Offered Securities for whom they may act as agents.
Underwriters may sell Offered Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Any underwriting compensation paid by the Company
and/or the Trustee Stockholder to underwriters in connection with the offering
of Offered Securities, and any discounts, concessions or commissions allowed
by underwriters to participating dealers, will be set forth in the applicable
Prospectus Supplement.
13
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with the Company, to indemnification by
the Company against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which they may be
required to make in respect thereof. Underwriters and agents may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company and/or
the Trustee Stockholder will authorize underwriters, dealers or other persons
to solicit offers by certain institutions to purchase Offered Securities from
the Company or the Trustee Stockholder pursuant to contracts providing for
payment and delivery on a future date or dates set forth in the applicable
Prospectus Supplement. Institutions with which such contracts may be made may
include, but are not limited to, commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others. The obligations of any purchaser under any such
contract will not be subject to any conditions except that (a) the purchase of
the Offered Securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject and (b) if the
Offered Securities are also being sold to underwriters, the Company shall have
sold to such underwriters the Offered Securities not sold for delayed
delivery. The underwriters, dealers and such other persons will not have any
responsibility in respect to the validity or performance of such contracts.
The Prospectus Supplement relating to such contracts will set forth the price
to be paid for Offered Securities pursuant to such contracts, the commissions
payable for solicitation of such contracts and the date or dates in the future
for delivery of Offered Securities pursuant to such contracts.
The anticipated date of delivery of Offered Securities will be set forth in
the applicable Prospectus Supplement relating to each offer.
LEGAL MATTERS
Certain legal matters in connection with the validity of the Offered
Securities will be passed upon for the Company by Christensen, Miller, Fink,
Jacobs, Glaser, Weil & Shapiro, LLP, Los Angeles, California. Terry N.
Christensen, a director of the Company, is a partner of Christensen, Miller,
Fink, Jacobs, Glaser, Weil & Shapiro, LLP. Certain legal matters relating to
the Offered Securities will be passed upon for any underwriters, dealers or
agents by Gibson, Dunn & Crutcher LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements and supplemental schedule of the
Company included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and incorporated by reference in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
14
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
OFFERED SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
OR IN THE AFFAIRS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES SINCE THE
RESPECTIVE DATES OF THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
-----
The Company............................................................. S-3
Use of Proceeds......................................................... S-6
Capitalization.......................................................... S-6
Selected Consolidated Financial Information............................. S-7
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... S-9
Regulation and Licensing................................................ S-12
Description of Notes.................................................... S-17
Certain Federal Income Tax Considerations............................... S-28
Underwriting............................................................ S-30
Legal Matters........................................................... S-30
PROSPECTUS
Available Information................................................... 2
Incorporation of Certain Documents by Reference......................... 3
The Company............................................................. 4
Credit Facility......................................................... 4
Use of Proceeds......................................................... 5
Ratio of Earnings to Fixed Charges...................................... 5
Description of Debt Securities.......................................... 5
Description of Common Stock............................................. 12
Trustee Stockholder..................................................... 13
Plan of Distribution.................................................... 13
Legal Matters........................................................... 14
Experts................................................................. 14
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[LOGO OF MGM GRAND, INC.]
$500,000,000
% SENIOR COLLATERALIZED NOTES DUE 2005
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PROSPECTUS
SUPPLEMENT
JANUARY , 1998
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BANCAMERICA ROBERTSON STEPHENS
DEUTSCHE MORGAN GRENFELL
CIBC OPPENHEIMER
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