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They burned the Monte Carlo ... and may get away with it
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They burned the Monte Carlo ... and may get away with it
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Posted At : March 17, 2009 01:05 PM | Posted By : D McKee
Related Categories: Harrah's,Labor,Pinnacle Entertainment,Steve Wynn,MGM Mirage,Columbia Sussex,Technology,Louisiana,Lake Tahoe,Current,Mississippi,Detroit,Goldman Sachs,Shuffle Master,Wall Street,Economy,Taxes
As we wait for the MGM Mirage earnings report, signs of desperation mount. If the company is willing to cast away a pearl like new, costly and high-yielding MGM Grand Detroit, what isn't sacred? Not even the corporate jet, provided the buyer doesn't welsh on the deal. (Guess those high rollers won't have to fly commercial for a while yet.) Whoever made that offer for MGM Detroit, though ... (s)he's one smart cookie, methinks.
Dumping regional properties at a time when that's where the strength of the casino industry is just doesn't make sense -- although you could probably make a case for ditching the already written-down Gold Strike in Tunica or the Grand Victoria riverboat in casino-killing Illinois. Actually, getting the hell out of the hellacious Illinois market seems like the best idea since forever.
Congratulations, Gary Loveman! You took home $39.6 million last year, while your company was crashing and burning -- not to mention pink-slipping 8% of your workforce. Don't say Loveman isn't feeling Harrah's pain: He's forfeiting a whole $100K in salary for 2009. There goes the college fund!
The casino giant is one step from the bottom of the Moody's bond-rating ladder. In a memo to the SEC, Harrah's Entertainment announced that managers were taking a 5% pay cut and that "it might have to delay expansion, sell assets or restructure debt." Delay expansion? No! Really? That was off the table the minute the ink was dry on the LBO. Refurbishment is also a low priority, as capex costs will be trimmed by as much as 59%.
Meantime, the guessing game begins over which assets might be on the block. In one of the busier threads over at Hunter Hillegas' Two Way Hard Three, fellow blogger Chuck Monster synopsizes the reshuffling of Harrah's properties between various holding companies, which includes a possible abandonment of the volatile (read: shaky) Lake Tahoe market. Sometimes I think Harrah's does this jiggery-pokery just to amuse itself watching the blogosphere try to determine What It Really Means.
In a regional update, most Lousiana markets were slightly down last month -- except Lake Charles, which Harrah's pulled out of, leaving Pinnacle Entertainment in possession of the field. Oops.
Pssst! Don't tell anyone! It's stashed as the second item of "In Brief" but Wynn Resorts is floating a stock offering to the tune of over nine million shares. (Other sources say seven million.) Wall Street had an understandably adverse reaction -- at first blush -- to this 7% dilution of Wynn stock, which closed up $1.07 today. Given that it's a proactive move to retire debt, it's tough to quarrel with Wynn.
Update: Clarification of the Wynn stock float comes by way of Forbes.
As for the undying speculation that Steve Wynn might want to buy back Bellagio or golden oldie The Mirage, one analyst -- Goldman Sachs' Steven Kent -- says he "would be surprised to see Wynn pursue this," given that Wynn is a builder, not a buyer.
Parenthetically, in the above-mentioned blog thread, Brian Fey makes the following, extremely trenchant observation: "Its pretty bad, that here we are almost 10 years later [following Wynn's ouster from Mirage Resorts], and Steve's biggest competition is still Steve's old properties. Just shows you how far behind everyone else is when it comes to the game."
Shuffle Master wins? Rival company Elixir Gaming settled litigation by selling its Asian shuffler business. The Las Vegas Review-Journal sees it as a win for Shuffle Master, while the Las Vegas Sun takes the opposite take, implying that Shuffle Master got its pockets picked -- which could mean an ignominous curtain for just-departed CEO Mark Yoseloff, if that's indeed the case. They report, you decide.
More of the Same Dept.: Democratic leadership in the Nevada Lege is going to do exactly what (little) is expected of them -- jack up existing taxes to onerous levels as a cop-out solution to our budgetary crisis. Booze and cigarettes are the low-hanging fruit of taxation but Nevada casinos better get ready to bend over and grab their ankles, as they're probably the next target of opportunity. Oh, and brace yourself for a much bigger beer-and-wine tab at the casinos if this goes through ... as though casino booze wasn't costly enough already!
Never let it be said that S&G didn't at least once have a kind word for Columbia Sussex. The former Tropicana owner is reducing its carbon footprint. Amen to that.