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MGM Grand Inc.'s Corp Credit Rtg Raised By S&P To BBB-

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/14/97--Standard & Poor's today has raised its corporate credit rating on MGM Grand Inc. to triple-`B'-minus from double-`B'-plus.

The outlook is now stable.

The upgrade reflects the better-than-expected results from its 50%-owned New York New York Hotel & Casino in Las Vegas, the continued steady performance of the MGM Grand, and Standard & Poor's expectation that debt leverage will remain moderate even as the company pursues its growth strategy.

MGM Grand owns and operates the MGM Grand in Las Vegas Nev., has a 50% interest in the New York New York Hotel and Casino, also in Las Vegas, and owns a small casino in Darwin, Australia. The company's current limited diversity is offset by the strong position of the MGM Grand and NY NY properties along the Las Vegas Strip, and its virtually debt free balance sheet, which provides the flexibility to finance new gaming projects. Potential new casinos in Detroit, Mich. and Atlantic City, N.J., as well as the expansion at the MGM Grand in Las Vegas, could result in about $2.5 billion in capital expenditures. Still, if the new developments materialize, the spending will be spread out over the next 3-4 years, and a good portion will be financed with free cash flow. Also, the opening of a new property or a potential acquisition would enhance the company's current limited business diversity.

The NY NY casino, which opened Jan. 1 1997, exceeded expectations during its first three months of operations by generating $35 million in EBITDA. Standard & Poor's expects near-term results to continue quite strongly. Despite its relatively small hotel room base, the property is situated next to more than 10,000 rooms, and its theme and location are driving a tremendous amount of walk-in traffic. The MGM Grand property is in the process of undergoing a complete renovation and expansion. Despite construction, the property generated about $53 million in EBITDA in the first quarter with EBITDA margins of 30%. The expansion of the facility is not expected to cause significant disruptions as much of the development is occurring beyond the existing casino, and is being phased in over the next few years.

During the first quarter ending March 31, 1997, the company generated $68.5 million in EBITDA and had only $94.1 million of debt outstanding. Free cash flow and a $1.25 billion bank facility will be used to fund the MGM Grand expansion and potential new projects.

OUTLOOK: Stable. Although debt levels will increase as new opportunities arise, Standard & Poor's expects management to maintain its moderate financial policy. Nonetheless, upside potential is likely to be limited until MGM is further into its growth strategy and its success and scope can be more accurately assessed. -- CreditWire

CONTACT: Greg Zappin, New York (1) 212-208-8615