MGM Resorts International terminated its agreement to manage a hotel-casino development in Vietnam that is partially owned by Pinnacle Entertainment.
In a filing Thursday with the U.S. Securities and Exchange Commission, Pinnacle disclosed that MGM Resorts exercised its right to end the agreement because the project did not achieve certain pre-opening milestones before March 1.
In an emailed statement, MGM Resorts spokesman Gordon Absher said the company would work with the project's developers to "ensure a smooth transition" of the resort's management.
Asian Coast Development Ltd., which is 26 percent owned by Pinnacle, is the developer of the Ho Tram Strip integrated resort complex in Vietnam. The company is currently constructing the first of five planned phases in the development.
The MGM Ho Tram Strip was to be managed by MGM Hospitality, a subsidiary of MGM Resorts, and would include 541 hotel rooms, restaurants and amenities, and a casino with 500 slot machines and 90 table games.
In August 2011, Las Vegas-based Pinnacle spent $95 million to acquire its stake in the Asian Coast Development. Harbinger Capital Partners is the majority owner of ACDL.
Last year, Pinnacle wrote off $25 million toward the investment because of the project's delays. According to the company's website, Pinnacle said its ownership stake in Asian Coast Development was 23 percent.
Macquarie Securities gaming analyst Chad Beynon told investors he wouldn't be surprised to see Pinnacle take further write-downs toward its investment in the project.
"The fact that MGM Hospitality will no longer be associated with this project will greatly detract from the success of the resort/casino," Beynon said in a research report.
"MGM not only provided a global brand name, but it was also was a significant part of the design and vision of the first phase. It remains unclear who will actually manage the first phase of the project now."
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