March 27 (Bloomberg) -- MGM Mirage won a waiver from lenders to pay $200 million on its CityCenter project without partner Dubai World, staving off for now a possible bankruptcy filing by the development.

The accord, coming hours before a payment deadline, lets MGM Mirage pay both partners’ obligations, the Las Vegas-based casino company controlled by 91-year-old Kirk Kerkorian said today in a statement.

MGM Mirage had to convince banks to let the casino company cover Dubai World’s half to keep the Las Vegas Strip project out of bankruptcy and let construction continue. The agreement buys time for talks with lenders and Dubai World, the state-owned investment company that is suing MGM Mirage to be freed from further CityCenter funding obligations.

“Dubai World welcomes MGM’s move to fund the total amount due today,” the state-owned investment company said in an e- mailed statement. “The funding injection gives the CityCenter Board more time to work through restructuring options. Dubai World looks forward to working with MGM during this process and to completing the project to the benefit of all parties.”

Under a two-month waiver from banks, the partners were required to split construction costs. That expires on May 15.

Bank of America is the administrative agent on MGM Mirage’s senior credit facility and is leading negotiations that led to today’s waiver and the earlier forbearance. Spokeswoman Melissa Schilowitz declined to comment.

Unfinished Project

MGM Mirage declined 24 cents to $2.85 at 4:15 p.m. in New York Stock Exchange composite trading. The shares were as low as $2.51 and has high as $3.66. They have tumbled 79 percent this year.

“I’m a little surprised that the banks went along and let them continue to finance it, and maybe end up financing the whole rest of the equity portion on their own,” Dennis Forst, an El Segundo, California-based analyst for KeyBanc Capital Markets, said in an interview. “It may be the banks were in so deep I guess they have no choice but to go along.”

The unfinished CityCenter development has hired bankruptcy attorney Martin Bienenstock of Dewey & LeBoeuf to represent the joint venture, a person with knowledge of the situation said. MGM Mirage hired Evercore Partners to lead financial negotiations and retained Weil Gotshal & Manges LLP as restructuring counsel.

Delaware Case

The biggest project on the Strip, CityCenter includes a casino, hotels, apartments and malls. MGM Mirage embarked on its biggest expansion with the multibillion dollar project. CityCenter is due to open in December amid a global recession that led to the Las Vegas Strip’s biggest gambling decline on record last year.

In its Delaware Chancery Court complaint, Dubai World alleges MGM Mirage, the largest casino operator on the Las Vegas Strip, violated terms of their partnership, citing cost overruns on CityCenter and MGM Mirage’s inability to borrow or guarantee it can remain a going concern.

The equal partners had agreed to fund “just under” $500 million each to fill a construction-payment shortfall until a $1.8 billion bank facility becomes available in June, MGM Mirage Chief Executive Officer James Murren said on a March 17 conference call.

With today’s funding, the remaining equity contribution needed to access that facility is about $800 million, MGM Mirage said. The next construction payment is due in April.

“MGM is fully aware of how important it is to finish the project, they’ve got an awful lot invested” in money and reputation, Forst said. “It’s an ongoing saga and I think we’re in the very early innings.”

All Options

Murren is considering all options, including a combination of asset sales, bond buybacks, fresh secured loans, discounted debt exchanges, and raising new debt or equity to avert an MGM Mirage bankruptcy, he said last week.

Dubai, one of seven sheikhdoms within the United Arab Emirates, also is under financial stress. Dubai received a $10 billion bailout from neighbor Abu Dhabi, which pumps more than 90 percent of the U.A.E.’s oil.

The smaller emirate accumulated $80 billion in debt to build real estate projects, including the world’s tallest building. Dubai’s real estate boom, fueled by low interest rates, petrodollars and investment from international companies seeking to tap Persian Gulf wealth, came to a halt last year when oil prices plunged.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

Last Updated: March 27, 2009 17:25 EDT