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LAS VEGAS-Casino operator MGM Mirage said Friday it completed the sale of its Treasure Island Hotel & Casino to an entity of billionaire Phil Ruffin for $775 million, which includes $600 million in cash and a $175-million 36-month secured note bearing interest at 10%. With hope receiving the remainder of the purchase price early, MGM Mirage gave Ruffin Acquisition LLC the option to repay the note on or before April 30 for a $20 million discount.

Ruffin appears to have made a pretty good swap. In 2007, he sold for $1.2 billion a 35-acre property on the Strip that was generating so little cash flow that the new owner opted to tear it down instead of operating it. This year, he pays $775 million for an 18-acre property on the Strip that generated EBITDA of $101.1 million in 2008, down from $128 million in 2007, and $ 376 million in net revenues, down from $431 million in 2007. Fourth quarter EBITDA in was $20.3 million, down from $29.7 million in the same year-earlier period.

TI has 2,885 guest rooms and an 87,000-square-foot casino. Ruffin reportedly plans to keep the property’s 3,200 employees and management at intact, as well as the Cirque du Soleil and pirate shows. TI’s occupancy in the fourth quarter was 92.2%, down from 96.6% in the same year-earlier quarter, while its ADR was $119, down from $142, and its RevPAR was $110, down from $137.

TI shares a 102-acre property with the Mirage casino resort. According to the SEC filing 18 acres that includes Treasure Island were to be parceled off as part of the transaction. Two parking garages not included in the transaction will continue to be shared by both properties.

Earlier this week, Mirage said it had obtained another reprieve from the lenders behind its $7-billion dollar senior credit facility, giving it 60 more days to wriggle out of trouble, possibly by selling off more assets. The news was included in its delayed annual report, which as expected included a statement from the company’s independent accountant expressing “substantial doubt about the company’s ability to continue as a going concern.”

MGM Mirage had $13.5 billion in debt as of the start of the year. It agreed to sell Treasure Island just prior to the end of the year. In January, it delayed the Harmon Hotel component of its massive Citycenter development and killed the 200-unit condo portion of that project. In Late February, it maxed out its senior credit facility by drawing down an additional $842 million.

In order to gain the 60-day reprieve from its debt covenants, from March 17 to May 15, MGM Mirage said it had to pay down the senior credit facility by $300-million and may not re-borrow the money without lender consent. In addition, the interest rate on the outstanding debt was increased by 100 basis points and the company is now prohibited through the end of the waiver from prepaying or repurchasing outstanding long-term debt or disposing of material assets without lender consent.

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