Kirk Kerkorian, through his holding Company Tracinda Corp today announced in a 13G regulatory filing that he was pledging an additional 48.8 million of his personal MGM shares as collateral under MGM's $500 million credit line, which he had used to buy Ford Motor stock. Kirk/Tracinda has now pledged his entire MGM equity stake of 148.8 million shares (54% of the company float). This action goes to show just how intertwined bad bets can be within a holding company's equity structure especially when leverage is involved. Kirk's misguided Ford bet was one thing, but having leveraged it with his crown jewel holdings, and especially if MGM stock keeps dropping, it is inevitable that Kirk will face stern margin calls, and may likely be forced to part with his legendary Vegas property. This could be just the event that Penn Gaming is expecting, as it awaits to snap up the MGM and associated properties for a bargain basement price.
MGM benchmark 7.625% bonds last traded at 48.5, from a 52 closing price yesterday, as MGM CDS kept creeping wider.
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