"Amigo" (friend) sounds to some extent like "me gay". It is one of the very few things that hand those
gm sounds similar to waht you describe and would be used in such context. One could try to convey its pronunciation as "aa-m-EE-g-oh", "uh-mee-goh" or "ah-mee-gaw". Judge for yourself here and here. Be aware that pronunciation can vary according to the country of origin of those kids, among other things.
"Amigo" and "me-gay" are completely different to me (a native Spanish speaker), but depending on how they say it, your own listening skills (or those of whoever described the word to you) and other nuances (like the problem of how to describe what you heard in written form on the Internet), it might be the word you are looking for.