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MGM Mirage's (MGM) $2.5 billion stock and bond offering has bought the resort and casino operator some time, but when it comes to liquidity, it's still sitting on the proverbial "short stack."

At issue is how much it's got riding on a quick economic and credit markets recovery.

MGM's offering, along with $1.2 billion of cash on hand, gives the company a total cash hoard of roughly $3.6 billion. From that, the company is expected to use about $2 billion to make mandatory payments on its credit facility and to redeem debt maturing in 2009 and 2017.

That leaves the company with $1.6 billion, which along with expected free cash from operations of around $400 million to $500 million, would barely be sufficient to allow MGM to cover its $1.6 billion in debt obligations and $300 million of cash needed to run the business over the next two years. The outcome is predicated on MGM meeting current analyst estimates.

But absent a quick recovery, these consensus estimates could prove optimistic.

Wall Street projects MGM's revenue per available room (RevPAR) number to be down 20%-25% in 2009 and flat to down 2% next year. For first quarter 2009, MGM's RevPAR was down 34% and for the month of April it was off 30%, implying that analysts are projecting a significant turnaround in this negative trend.

That seems odd given the decline in Las Vegas visitor volume, which is accelerating at the same time that the city's hotel room inventory is growing, depressing both occupancy rates and room pricing.

According to the Las Vegas Convention and Visitors Authority, the city's visitor volume declined 8.7% for March 2009 year to date on top of a 6.5% decline in 2008. At the same time, Las Vegas' room inventory increased 3.4% for March 2009 YTD on top of a 3.4% increase in 2008.

The number of rooms available is set to rise even further given MGM's plans to open CityCenter, a high-end casino, resort and hotel by the end of 2009. By some estimates, this will increase the Las Vegas high-end room capacity by 22%, putting further pressure on room prices and occupancy rates.

Even if the company successfully achieves consensus targets, it will remain at the mercy of the credit markets. Its $5.8 billion credit facility is up for renewal in 2011, and it faces a further $530 million in debt maturities that year.

It won't be long before MGM needs to tap the credit markets again. Shareholders, who saw their ownership reduced by some 35% during MGM's recent 143 million-share offering, could face further dilution in the event that the company decides to issue more equity.

Another issue that's been ignored is that MGM appears to be under-investing in maintenance capital expenditures. Its capital expenditure is down from roughly $700 million in 2006 to an estimated $200 million in 2009.

Given its tight liquidity as well as limitations imposed by amendments to its credit facility, analysts estimate that the company will continue to under-invest for the next few years. However, at some point these under-investments will come back to haunt MGM, especially if it starts losing market share to newer or better managed properties.

In the end, despite a temporary relief, the odds still appear to be stacked against MGM.

(Sameer Bhatia, CFA, is a columnist with Dow Jones Newswires. He brings over seven years of experience advising clients on capital markets, valuation and strategic issues in investment banking, consulting and equity research roles. He can be reached at 201-938-5863 or by email at sameer.bhatia@dowjones.com. Dow Jones Newswires is enhancing its news, commentary and analysis for the investment banking community, and is providing it on this service temporarily. To ensure continued access to the best of Dow Jones news and opinion on companies, sectors and deals for bankers and research analysts, please contact investmentbanker@dowjones.com.)

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