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Posted At : August 19, 2008 12:56 PM | Posted By : D McKee
Related Categories:
Donald Trump,Wall Street,Morgans Hotel Group,Isle of Capri,Sheldon Adelson,The Strip,Harrah's,Columbia Sussex,Station Casinos
British Reuters lays out a dire scenario for casino bonds, the second-most-distressed sector of the junk-bond market (only media firms are doing worse).
"We believe it probably hasn't hit its bottom," is the grave verdict of Moody's Investors Service analyst Keith Foley. His formula for highest risk: lone-property operators with heavy debt burdens. Stateside, this would seem to spell "Las Vegas Sands," where debt is approaching $10 billion and Palazzo has been a dud, at least by the benchmarks expected of a new Strip megaresort. (Morgans Hotel Group, which staked its future on the Hard Rock Hotel & Casino, probably ought to be worrying, too.)
So far, one could argue that recent wave of casino bankruptcies has had a Darwinian effect, singling out the bottom-feeders (Columbia Sussex) and market laggards (Greektown). The deeply distressed bond status of Trump Entertainment Resorts may portend yet another visit to Chapter 11, but Station Casinos' bonds are doing little better.
Other danger signs identified in the article include ...
• Debt-to-cash flow ratios of 9- or 10-to-1 (five times in excess the ratio deemed "investment grade"); Harrah's Entertainment, with its $29.7 billion buyout tab, is singled out, a poster child for ...
• LBOs conducted "at the worst possible time."
• "Financing for casinos is also in dire straights [sic], a concern for companies that depend on expansion to drive growth," like Isle of Capri, at least under its previous regime.
Well worth repeating: "With this heinous act of sheer unadulterated corporate greed and disregard for customers, Harrah's has proven that they don't care at all about our 'fun' regardless of how they have sold the concept of gambling being 'paying for entertainment.' This is all about Harrah's making Harrah's a profit even if Harrah's spokesmouth Gary Thompson tells Liz Benston in the LV Sun that the games were removed because they weren't popular with players. Wheel of Fortune? Not popular with players? How truly out of touch are these numbskulls?" -- Chuck Monster of VegasTripping.com, inveighing against Harrah's decision to start removing IGT's Wheel of Fortune from its casino floors.
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