(LAS VEGAS, Nv) -- The Dubai state-run developer helping build the $8.6 billion CityCenter on the Las Vegas Strip says it is suing partner MGM Mirage amid concerns about the project's viability.
Dubai World says subsidiary Infinity World filed the lawsuit in Delaware Chancery Court "to protect its rights and the best interests of the CityCenter project."
MGM Mirage is struggling under more than $13 billion in debt as it pushes ahead on CityCenter, its largest casino yet. Infinity says recent statements by MGM Mirage about its future viability constitute a breach of contract and put the CityCenter project at risk.
It says it's asking the court to relieve it of its obligations under the joint venture agreement.
"What we are attempting to do is complete this project," George Dalton, group general counsel for Dubai World, told reporters on a brief conference call in Dubai. He called the lawsuit "a very regrettable step," but said the state-owned company "actually had no choice."
On the heels of this news, Fitch Ratings downgraded MGM Mirage's credit ratings. MGM's Issuer Default Rating was downgraded to "C", the lowest possible junk rating.
Just last week, MGM Mirage executives gave an update to the Nevada Gaming Commission saying that everything was on schedule with CityCenter's opening at the end of the year.
The massive project is in the process of hiring thousands of workers and many people were looking to it as the economic savior for Las Vegas.
"What we need to happen is what CityCenter was promising; 12,000 permanent relatively high-paying jobs," said Thomas Carroll, UNLV economics professor.
Those people will pump money bank into our economy by going out to dinner, buying groceries, or buying a house, Carroll says for every one hospitality job created, it creates one private sector job to support the business increase. He adds, the 12,000 new jobs could go a long way in replacing jobs that vanished due to the recession.
"With that lost, it is probably going to make the recession that much longer and that much deeper," Carroll said.
In the lawsuit filed Monday, Dubai World subsidiary, Infinity World, cited MGM Mirage's shaky financial position as a breech of the contract for CityCenter.
The company wants MGM Mirage to pay unspecified damages and wants to get off the hook for paying for half of the project. In an earnings call last week, MGM Mirage CEO Jim Murren said the two companies have an outstanding relationship. He went on to say their interests are aligned.
But something changed within the last six days. Murren did not want to talk about this latest development on camera.
Even Nevada Governor Jim Gibbons is watching this latest development closely and says he is very concerned.
"We need good thoughts. To think good thoughts. This news is not coming at a good time," Carroll said.
He says MGM Mirage would not be able to replace the Dubai World money if the are able to successfully pull out of the project.
(The Associated Press contributed to this report. All Rights Reserved.)
