The problem, of course, is that TI has a very low cost basis, as is the case with many gaming assets. The gross purchase price of $775 million seemed fair but at $600 million, MGM is only receiving around 7.0x 2009 EBITDA. This multiple is less than our projected leverage ratio. The transaction is neither accretive to equity nor does it de-lever the company.
Assuming the rest of the portfolio is worth a premium to TI, say 8x, that doesn’t leave much equity left over.