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Add another potential trading catalyst for MGM. Due to construction issues at the Harmon Hotel, Spa and Residences, MGM may downsize the CityCenter budget. Construction on the Harmon part of CityCenter may only be suspended temporarily, but given MGM’s liquidity and covenant issues, any delay should be viewed positively by investors.

Apparently, structural problems, possibly design related, are inhibiting further construction. MGM may decide to “wrap” the building and suspend construction. We believe this could reduce the budget by several hundred million dollars. The cost “savings” combined with bond buybacks and the TI sale put MGM in a pretty good position to make it through 2009 without busting its covenants.

We still have concerns surrounding 2010 liquidity and the prolonged Las Vegas depression. However, as we wrote about in “A TALE OF TWO YEARS” on 12/26/08, the trade looks higher on MGM and the gaming sector. A CityCenter downsizing, albeit modest, adds one more near-term catalyst to the mix.

The January effect lives again!

Harmon Hotel, Spa and Residences could be delayed