Kerkorian shuffles the cards

If you hold gaming stocks, this is the day to come to pappa. Kirk Kerkorian's interest in the MGM-owned Bellagio Hotel and the nearby CityCenter, a massive retail and entertainment project, got casino issues on a tear. MGM Mirage was the biggest mover, up 27 percent, or $17.03, but Wynn Resorts climbed 7.4 percent and Las Vegas Sands gained 5.6 percent. (With his 56 percent share of MGM, Kerkorian himself has just made more than $2.5 billion.) The speculation, of course, is that the L.A. billionaire's overtures could put all of MGM in play, perhaps to a private equity firm. From Dealbook:

Robin M. Farley, an analyst at UBS, wrote Tuesday that it appears to be a “win/win situation” for Mr. Kerkorian (who could use a victory after his unsuccessful bid for Chrysler and his retreat from General Motors last year). Commenting on Mr. Kerkorian’s latest moves in Vegas, Joel Simkins of the Prudential Equity Group described the 89-year-old billionaire as “having his cake and eating it too.” Even if Mr. Kerkorian’s recent rumblings don’t lead to a transaction, his bid for MGM Mirage’s “crown jewels” may help focus the market on the underlying value of MGM’s assets, Ms. Farley said in a research report. That alone would bring big gains to Mr. Kerkorian, as the holder of the majority of MGM Mirage’s stock.

Not everyone is happy - most notably MGM bondholders. The big concern is that some buyout firm will take over MGM and then load up the company with debt, which would lower the price of the bond. As noted by Deal Journal's Dana Cimilluca, "no bondholder likes to get 'private equitized' but it especially rankles when the company in question has just sold bonds, and in the process soothed such leveraged buyout fears. According to S&P, management of MGM Mirage, which has a market cap of about $18 billion, told investors when it was selling bonds just two weeks ago that it has no intention of going private."