David Mckee's Stiffs & Georges - Pinnacle Entertainment

MGM: CityCenter worth $4.88 billion

Tue, 20 Oct 2009 15:37:00 -0700

MGM Mirage has announced that it's writing off approximately $1.3 billion (i.e., taking an "impairment charge") against CityCenter, with $348 million of that chalked up to falling real estate values. (Some $174 million of that will apparently be fobbed off on MGM's partners, bringing MGM's writeoff down to $1.1 billion.) The value of MGM's half-share of the project has been restated at $2.44 billion (a 31% decline). No word yet from Dubai World as to what it thinks its half of CityCenter is worth.

Kirk Kerkorian's Tracinda Corp. shook a rhetorical fist at Wall Street, stating in a press release that there is "substantial unrecognized value in MGM and CityCenter that is not reflected in the market value of MGM’s stock." It's nice to know that even mega-corporations can feel underappreciated.

Bottoming out? Air traffic into and out of Las Vegas was almost flat, year over year, -1.2% in September, helped by passenger-load increases -- and I don't mean those hefty people who take up two seats -- on nearly every domestic carrier not named US Airways (-26%). Considering that international traffic was -21%, this is augurs well for a return of domestic consumer confidence in Sin City. And, yes, flat is the new "up."

Pennsylvania: Rendell intervenes. Never accuse the Keystone State Lege of acting in haste. The table games bill is still mired in conference committe, prompting Gov. Ed Rendell (D) to wade into the fray. Rendell's magic number for the amount of revenue table games must yield in fees and taxes is $200 million. To get there, the guv believes the tax rate must be 16%. But he's closer to the GOP position, warning that the higher levies favored by Dems would "kill the golden goose" and deprive Little Johnny's school of needed funding. Meanwhile, Rivers Casino continues to disappoint, with the lowest revenue-per-slot in the state.

Finally, a taker! Out of left field, a contender has emerged for the orphaned casino license in Cherokee and Crawford counties in Kansas. You'll recall that it was awarded to Penn National Gaming, seemingly ages ago, but Penn -- spooked by nearby tribal competition -- all but spat on the license before leaving in a huff.

Enter Ozark Trail Gaming, a consortium of Kansas businessmen, offering to build a $225 million, 900-slot, 30-table casino. After some bad experiences with carpetbagger casino developers trying to dictate terms to the Sunflower State, you have to think the Kansas Lottery Board will look kindly upon this native-son effort.

ColSux loses again. A $41.5 million summary judgment has been slapped on Columbia Sussex for abrogating its purchase of the President riverboat in St. Louis (now the property of ColSux arch-foe Pinnacle Entertainment). Regulators for Missouri didn't like the looks of ColSux and its CEO, William J. Yung III (above). The latter pulled his license application and used that as an excuse to void the President purchase, but a federal district judge wasn't buying it.

The former President owners were also suing ColSux for jacking up parking rates for casino patrons by 560% (no, that is not a typo), a truly Yungian move. If poetic justice were served in this case, the court would award the ship to ColSux. Since the President's days on the water are numbered and Yung will licensed in Missouri only in his wildest dreams, trying to dispose of that near-worthless asset might be the aptest punishment of all.

Case Bets: Corzine, Penn vs. MTR, Pinnacle, Manilow & strippers

Wed, 07 Oct 2009 15:06:00 -0700

Forbidden by New Jersey law from directly contributing to political campaigns, casino companies are making an end run through Virginia. Harrah's Entertainment, Boyd Gaming and IGT are among those funneling campaign cash into a reverse version on the Underground Railroad. No wonder Gov. Jon Corzine (D) is able to carpet-bomb his opponents with advertising, if he so chooses.

Hey, big spender. The New Jersey gubernatorial race may be chump change compared to the cash being expended in the battle over Issue 3, which would permit four Vegas-style casinos in the Buckeye State. This is boiling down to a proxy fight between Penn National Gaming (pro) and racino specialist MTR Gaming (con). You'll recall that the Ohio Supreme Court nixed Gov. Ted Strickland's plan to unilaterally add slots to the state's horse tracks, which might have given MTR a level playing field with Penn.

While I can understand why Penn or Harrah's would be willing to pay 23% in taxes in Iowa or 27% in Kansas, it's mind-boggling that Harrah's would be chomping at the bit in Rhode Island, where the rate is 73%. Oy vey!

A green shoot. The Baton Rouge Business Journal reports that Pinnacle Entertainment is inking contracts to begin driving piles for its Lake Charles project. Called "Sugarcane Bay" and budgeted at $407 million, this is the first positive movement we've seen out of Pinnacle in a while (unless you count its hijinks with the President license up in Missouri). Good on them.

Manilow on the move. The Las Vegas Hilton has confirmed what all suspected: Barry Manilow's contract expires Dec. 30 and will not be renewed. As we reported in Question of the Day, it's nearly a done deal that he will now set up shop at Paris-Las Vegas, whose main showroom has gone long unused.

Good luck trying to get the Vegas constabulary interested if your car is stolen or your home burglarized. They're too busy going undercover to get lap dances. As Richard Abowitz notes, rampant prostitution on the Strip goes unchecked in the meantime. It's an open secret around here, although many of the "working girls" look downright scary, so you have to wonder how they turn tricks, especially in this economy.

Atlantic City sucks ...

Tue, 22 Sep 2009 18:05:00 -0700

... says the Motley Fool, in essence. Even Borgata, which posted a higher operating profit year/year, is deemed merely to suck less than everybody else. I'm not sure I'm with the Fools on this one. For instance, shouldn't Sands Bethlehem be doing better than fifth among Pennsylvania casinos, especially when you consider its proximity to New York City?

Elsewhere on the Boardwalk, the UAW is fighting Trump Plaza, the Plaza is fighting the National Labor Relations Board and Trump dealers are fighting amongst themselves. Since 32% of dealers initially voted against UAW representation, it should be a cinch to round up 30% to sign a decertification petition. Kudos to Trump Entertainment Resorts CEO Mark Juliano for going out of his way to soothe potential animosity between labor and management.

MILF convention in A.C.: On Oct. 3, former Bunnies and other veterans of the short-lived Playboy Hotel & Casino will return to the shore to relive the good old days. A few might even wriggle into their old Bunny costumes. Maybe a re-infusion of the Playboy brand is what Atlantic City needs. It can only help. Are you listening, Carl Icahn? Revel? Pinnacle Entertainment? Anybody?

Finally, a reason to visit Orlando ...

... or maybe not. And that dude from Scotland is in serious need of subtitles.

Resort-style casinos come to Colorado and doesn't Ameristar's new hotel look lovely? Now, if only somebody would build a mid-market property like this on the Strip. Why must average Americans settle for older, second-tier properties if they're to afford a Vegas vacation?

Health care reform + Internet gambling? Is it just me or is Sen. Ron Wyden (D-OR) onto something here? This may be just the carrot to dangle in front of legislators who still balk at allowing Americans to wager on the Web.

Creditors screwed again. How much is Greektown Casino worth? Is it the $725 million its creditors claim? Or the $540 million that Greektown asserts? Or maybe the lowball $485 million that lead bidder Tom Celani is willing to pay? Greektown's recent -- and well-publicized -- inroads into the market share of its Detroit rivals lend merit to the higher-end valuations. If the place was in the doghouse, I might sympathize with Celani (who's likely to boot the very management team responsible for Greektown's turnaround), but Fine Point Group has definitely enhanced a once-seedy casino's value.

It's official. VIP-player commissions in Macao will be capped. Since the war over junketeer commissions was threatening to make Macao a negative-revenue proposition, the new ceiling will greatly improve cash flow for Macanese operators. Middle-of-the-pack Galaxy Entertainment is expected to benefit the most (+27% EBITDA), followed at some distance by Stanley Ho (16%), with Las Vegas Sands and MGM Mirage bringing up the rear. Although the elderly Ho may be on his deathbed, he's lived long enough to broker peace in a potentially destructive situation where the only sure winners were the sought-after junket operators.

Gambling scandal ensares eight more

Mon, 21 Sep 2009 18:32:00 -0700

It's not quite on the global scale of the Ultimate Bet brouhaha, but the Tran Organization's conspiracy to fleece dozens of U.S., Canadian and tribal casinos is racking up an amazing head count. To date, federal prosecutors have already nailed 31 scalps to their wall, not counting three other individuals to who pled out to related charges (including one in Canada).

If you thought this was the end of the Tran Organization ... surprise! The feds unsealed another set of indictments this month. Eight more individuals were hit with various counts of "conspiracy to steal money and other property from Indian tribal casinos, and conspiracy to travel in interstate and foreign commerce in aid of racketeering."

At the core of the Tran Organization's scam was the execution of "false shuffles," whereby "slugs" of unshuffled cards were insinuated into blackjack and mini-baccarat decks. This required the cooperation of corrupt casino employees and, from the looks of the Department of Justice's announcement, the core Tran Organization members must be rolling on their casino-employed helpers.

The Tran gang managed to take no fewer than 26 casinos during the life of its scheme, which is a very black mark against the industry's standard of game protection. The dishonor roll is as follows:

1) Beau Rivage Casino, Biloxi, Miss.
2) Casino Rama, Orillia, Ontario, Canada
3) Foxwoods Resort Casino, Ledyard, Conn.
4) Gold Strike Casino, Tunica, Miss.
5) Horseshoe Casino, Bossier City, La.
6) Horseshoe Casino & Hotel, Tunica, Miss.
7) Isle of Capri Casino, Westlake, La.
8) Majestic Star Casino, Gary, Ind.
9) Mohegan Sun Resort Casino, Uncasville, Conn.
10) Palace Station Casino, Las Vegas, Nev.
11) Resorts East Chicago Hotel & Casino, East Chicago, Ind.
12) Sycuan Casino, El Cajon, Calif.
13) Cache Creek Indian Bingo & Casino, Brooks, Calif.
14) Emerald Queen Casino, Tacoma, Wash.
15) Imperial Palace Casino, Biloxi, Miss.
16) Argosy Casino, Baton Rouge, La.
17) Trump 29 Casino, Coachella, Calif.
18) Isle of Capri Casino, Bossier City, La.
19) Agua Caliente Casino, Rancho Mirage, Calif.
20) Spa Resort Casino, Palm Springs, Calif.
21) Pechanga Resort & Casino, Temecula, Calif.
22) L'Auberge du Lac Casino, Lake Charles, La.
23) Nooksack River Casino, Deming, Wash.
24) Barona Valley Ranch Casino & Resort, Lakeside, Calif.
25) Caesars Indiana Hotel & Casino, Elizabeth, Ind.
26) Monte Carlo Resort & Casino, Las Vegas, Nev.

Harrah's buying spree

Tue, 15 Sep 2009 17:33:00 -0700

Thanks to reader Todd Bristow, who tipped me to Harrah's Entertainment's $89.5 million purchase of Thistledown Race Track, near Cleveland. Thoroughbred Times reports that over half of that amount ($47 million) is a "contingency" payment. The extra 47 mil would kick in if legislation is upheld that would allow conversion of Thistledown to a racino. The track is one of several assets being disposed of by bankrupt Magna Entertainment. If Harrah's can't step up to the plate, Penn National Gaming and Pinnacle Entertainment are in the on-deck circle.

As you've probably heard, Harrah's is also gobbling up the debt carried by Planet Hollywood. It's a strategic move, considering that Harrah's already owns acreage that extends back from Bally's and Paris-Las Vegas to Koval Lane and then wraps south around Planet Ho. It's also been posited that this could be a "passive investment," a gamble that Planet Ho will come back in a big way in the future. Sounds rather iffy to me but stranger things have happened.

Mind you, this is also the same Harrah's that has been buying back its own debt at distressed rates (most recently at 67 cents on the dollar) and restructuring payment schedules like mad to stay ahead of an avalanche of $19 billion-plus it owes on its LBO. Harrah's creditors, are you feeling like suckers yet?

Or perhaps the money is coming from sugar daddies Apollo Management and Texas Pacific Group. Apollo has already been kicking the tires of Fontainebleau and may well be the "potential buyer" who's poised to take the keys to that Edsel. Even with Harrah's skill set, a high-end condo-hotel like F'bleau would be new business model with which to tangle.

At least the likely scenario is that Harrah's would be merely the mechanic, pocketing a fee for trying to get F'bleau up and running. Gives new meaning to "cash for clunkers," no? (Then again, Penn Nat'l may be smarting so much from that thwarted breakup fee in Ohio that it decides to buy F'bleau as a bank-shot means of getting back at Harrah's. Who knows, when CEO's egos have been bruised.)

As the cherry on top, Harrah's furtive move on Planet Ho inspired the following "No shit, Sherlock" headline, courtesy of the Las Vegas Review-Journal: "Harrah's debt purchase could lead to takeover, analyst says." Gee, ya think? I look forward to, "Beginning of autumn could lead to lower temperatures."

Optimism in Macao, euphoria at CityCenter

Tue, 08 Sep 2009 17:33:00 -0700

Relaxation of stringent visa restrictions from Guangdong Province came a full four months sooner than expected, starting Sept. 1. Now, residents will be able to visit Macao once a month instead of quarterly. While this has prompted J.P. Morgan to raise its price target on Las Vegas Sands stock, analysts also fret that Sands may overreact and go pedal to the metal on its unfinished Cotai Strip™ hotels.

Those same analysts are bullish on the manufacturing sector, though. They think casinos will be more willing to reinvest in the slot base as 2009 draws to a close. Also, the onward march of casino expansion means more jurisdictions and facilities to whom IGT, Bally and WMS can peddle their products. They're 'meh' on regional casino operators like Penn National, Ameristar Casinos and Pinnacle Entertainment, due to flattish performance. (Penn could catch a break in Kansas, though I still think Cordish Gaming has that sewn up.)

But that's a rave notice compared to the long face Morgan analysts pull when pondering Boyd Gaming's prospects. They cite the slow-to-recover, promo-driven locals-casino market in Las Vegas ("trickle-down" economics of the worst sort); Atlantic City's critical condition -- "the best-case scenario here is that [Borgata] would do less bad" than most of A.C. -- those blah regional metrics and new competition for the Blue Chip riverboat in Indiana, which had been looking like 2009's feel-good story.

Intriguingly, the prospect of a Strip acquistion is floated in lieu of a 'stalking horse' bid for floundering Station Casinos. Boyd's still got enough unused borrowing capacity it could even swing an acquisition of The Mirage (with money to spare), not to mention some of the lower-hanging fruit, which now includes Planet Hollywood. But if the J.P. Morgan guys are gun-shy concerning Boyd ...

They're over the moon about MGM Mirage's CityCenter: "we are increasingly under the belief that City Center will be a new must-see property for both domestic and international gamers/travelers that should drive solid visitation volumes to the Strip in 2010. We were impressed with the massive 18m-square-foot complex ... a new type of high-end product for the Strip that should garner increased trips. It has a very contemporary feel that is different than anything else on the Strip, with lots of natural light and high ceilings, interesting room product and, for a massive property, ease of getting around from one 'neighborhood' to the next."

More good news comes in the form of a press release from Commerce Casino (in Commerce, Calif.), which rolled out the welcome mat for a group of undoubtedly weary firefighters. A strike force of 30 Bay Area-based firemen is being housed in the casino's hotel, with the casino comping all meals and picking up most of the hotel tab. Let's hope that such civic-mindedness spreads through the industry like -- if you'll forgive the analogy -- wildfire.

In case it matters, "super-starlet" (yes, that's the official term) Holly Madison has been given a 12-month contract extension at Peepshow, so she's obviously earning her pay. Also, I've heard through the grapevine that she and incoming Aubrey O'Day do not get along, so the timing of the Madison announcement should make clear who's got the upper implant in this situation.

Pinnacle meets karma

Thu, 27 Aug 2009 13:30:00 -0700

Plans by Pinnacle Entertainment to move its President riverboat upriver just hit a big snag. Taking the view that the President's license is portable, Pinnacle hoped to use either the vessel itself or the license to jimmy open a new market niche along the Mississippi River.

Seems the Missouri Gaming Commission doesn't hold with Pinnacle's logic. Move the ship, they say, and it's open season on that 13th (and last) license in the Show-Me State. Right now, Pinnacle's keeping the President operational as a charity case -- thereby preserving the license -- but the Coast Guard is likely to shut her down in 10 months, so decrepit is the vessel.

Not that I wish ill for Pinnacle, one of the classier outfits in the industry, but this here is what's called "karma." Both Pinnacle and Ameristar Casinos pushed hard for legislation last year that uncapped the state's loss limits in return for capping the number of licensees. It was an anti-competitive move that was inveighed against in these pages.

Ameristar and Pinnacle tried to lock up what was an open territory. Now, with the President's license skittering about the field like a wet football, Pinnacle's going to find itself having to grapple with the very competitors it thought it had excluded from the game. Which is as it should be.

There can be only one. Two casino proposals from Cordish Gaming and Penn National have been forwarded to the Kansas Lottery Gaming Facility Review Board (Uff da!) for final arbitration, Remember that the last time we went through this, Penn got a whopping zero votes (probably due to a series of peevish public pronouncements), but then Cordish wanted to resubmit its project in smaller form.

This time around, Penn execs have been playing well with others, rather than trying to dictate the process. They're promising a three-phase, $564 million casino-resort (subject to certain economic conditions). Cordish is choosing to under-promise, committing only to a $390 million casino, at least until bluer skies return. Partnership with the Kansas Speedway still gives Cordish an edge (as does the Hard Rock brand) ... but the Kansas-casino process has been long, tortuous and filled with reversals of fortune. (Mike Ensign, anyone?)

Speaking of Kansas ... shoo-in Foxwoods has announced that it's restructuring its debt and enlisting outside assistance, yet another victim of ill-timed expansion. Small wonder Foxwoods and Lakes Entertainment decided to pool their pennies on Chisholm Creek Casino (above) rather than duke it out for the Wichita market.

Compromise is near. Down in Florida, that is. A formula too complicated to summarize here would bring the Seminole Tribe and the Sunshine State's Lege into agreement. (The Seminoles took one look at the compact fashioned by the Lege last spring and spat it out like bad food.) In return for accepting some restrictions on game offerings at some casinos, the Seminoles get a complete exemption from paying taxes to the state -- if private-sector gambling spreads beyond Broward and Miami-Dade counties. And if existing non-tribal casinos get, say, blackjack the Seminoles' obligation to the state is halved.

So tell me, why does Sheldon Adelson seriously think Florida is a potential growth market?

Saving money? Buy the Trop!

Fri, 14 Aug 2009 17:57:00 -0700

If you're looking for a bargain on the Strip, what about buying the Tropicana Las Vegas? The Las Vegas Review-Journal found that Onex Corp. got $440 million worth of equity (or a 61% share) for a Filene's Basement price of $137 million. That would make the "street value" of the whole Trop $228 million, or $6.7 million an acre -- a fifth of what Wall Street valued it at the peak of the Aztar Corp. feeding frenzy. Columbia Sussex won, Pinnacle Entertainment lost ... and Pinnacle wound up being the lucky one, as ColSux toppled under insupportable debt.

The Trop's "paper" value would put it in the Treasure Island class, at $733 million. But you'd need an electron microscope to find the Trop's recent EBITDA, so nobody's going to pay Phil Ruffin-sized dollars for the place now. New owner Onex is a private equity firm that dabbles in real estate and sundry other industries. However, unlike some recent bunglers in the casino industry, Onex had the smarts to hire Alex Yemenidjian to head up its casino efforts, first in Illinois and now on the Strip. Compared to those private equity confreres who bought into the industry at its apogee, Onex's Trop move looks downright brilliant.

Competition forces sanity

Mon, 13 Jul 2009 18:50:00 -0700

While the Bible Belt may hold out until the bitter end, we may finally be seeing the demise of the "boats in moats" arrangement, a fig leaf that enabled Midwestern states to blushingly accept casino money. Illinois has started phasing it out. Ohio Gov. Ted Strickland's decree today that seven Buckeye State racetracks can go to racino status may be a real game-changer for neighboring Indiana.

First, a word on the Strickland move. It anticipates legislative passage of a package deal that would require tracks to pay $65 million upfront and the usual usurious tax rate (48-50%). However ... slot machines would be purchased by the state (and run under the auspices of the Ohio Lottery), which softens some of the pain. Racino facilities would have to be periodically upgraded, too, at an average of $16 million/year.

All this has spurred (well, slowly prodded) Indiana's Lege to take a second look at the Hoosier State's riverboat regime. This could mean everything from on-land casinos to free drinks for players. There's also talk of "simplying" taxes and admission fees. How about simply eliminating the latter? It's a paternalistic anachronism that needs to go away.

Don Barden's two Majestic Star boats will likely prove an impediment. Some solons want any arrangement to include moving one of them out of Gary, Ind., to better the chances of both. Whatever the case, don't expect any action until next year.

The recession is catching up with regional casino markets. Even the loosening of operating rules in Missouri wasn't enough to stave off a slippage in revenues. Chrysler and Hummer plant shutdowns might explain a -1% shift in St. Louis, but what about a -2.5% June in Kansas City? A 2% drop in statewide slot win was almost countered by an 8% jump at the tables, where higher betting limits are now in force.

Ameristar Casinos took the hit in K.C., down 12%. All other three major boats posted growth, led by Isle of Capri, up 5%. With a $19 million June, the Ameristar boat still led the market in dollar volume but both Harrah's Entertainment and Penn National are closing the gap.

In the greater St. Louis area, both Harrah's and Ameristar fell by an average of 5%, while Pinnacle Entertainment's Lumiere Place gained almost 6%, really starting to give the two older casinos a battle. Even the snake-bitten President had a good month, chipping in nearly $2 million to Pinnacle's kitty.

Further good news came in the form of the bulletin that Isle of Capri had eked out a month in the "plus" column. So even an outwardly disappointing June in the Show-Me State cosseted some significant tidings of comfort and show.

Updates: Pinnacle, Boyd, Foxwoods, Donald Trump & Criss Angel

Wed, 22 Apr 2009 16:07:00 -0700

Don't wait by the phone if you've got a date with Pinnacle Entertainment. It has just pushed back the timelines on its Baton Rouge and Lake Charles projects by five months. It cited investor reluctance and warned more delays are likely.

Analysts like few gaming stocks and one of those lucky few is Penn National. But a Morgan Joseph analyst thinks Penn has gone about as high as it should and perhaps too high. The sparked an early sell-off of PENN, thankfully followed by a rally.

One more thing to blame on casinos. The tighty righties (and lefties) are going to have a field day with this. It's a windfall of free publicity for Foxwods Resort Casino, though.

The mouth that snored: How far over the shark has casino mogul-turned-TV performer Donald Trump jumped? Would you believe he was "spotted dozing off during Paul McCartney's concert Sunday at The Joint at the Hard Rock Hotel," according to gossip columnist Norm(!) Clarke. By all accounts, the McCartney show was far and away one of the most electrifying concerts given in Vegas in quite some time, launching Joint 2.0 in style. Sleepy Uncle Trump, though, officially qualifies for fuddy-duddy status.

Mike Weatherford, author of Cult Vegas, has a refreshingly contrarian take on the Criss Angel brouhaha from last weekend. Both MGM Mirage and Cirque du Soleil knew what they were getting (or at least thought they did) when they signed Angel. The real disgrace here, IMO, is that it took Cirque nearly 72 hours to crawl forward with an apology. D'ya mean to say they actually had to think it over? Ridiculous ... though not as ridiculous as the amount of oxygen being consumed by the Carrie Prejean kerfuffle. Would the vaudeville hook please drag that Stepford Wife-to-be and her have-they-nothing-better-to-do detractors off the stage, please?

(Prominently visible in at least one clip from the show was Treasure Island owner Phil Ruffin, separated from Old Man Trump by a stunning beauty whom I took to be Mrs. Ruffin. Whoever she was, the leading pageant contestants weren't a patch on her.)

Pinnacle: the untold story

Tue, 21 Apr 2009 11:51:00 -0700

Is waxing and buffing the Pinnacle Entertainment limo a prerequisite for scoring an interview with its CEO? This small masterpiece of selective omission is more interesting for what it elides than what it says. The article parrots Dan Lee as saying Pinnacle believes "not to start building something without the money to finish."

That's an excellent precept but it would resound with greater authority had Pinnacle not gotten bogged down in Atlantic City by failing to practice what it preaches. It bought Carl Icahn's old Sands, razed it, cleared the land ... then found it couldn't raise the capital to build the megaresort Lee had envisioned. By that point, Pinnacle had exercised such a heavy hand in its attempts to acquire more acreage -- at prices it intended to dictate to the market -- that the project's subsequent collapse didn't even inspire much regret along the Boardwalk. Now Pinnacle's got money tied up in Atlantic City it could be using to go trophy hunting along the Strip.

Also, it's not a good sign that Pinnacle's half-billion-dollar Lumiere Place is finishing a very distant second in the company's portfolio, doing only 57% the revenue of L'Auberge du Lac, down in Lake Charles, La. True, L'Auberge owns a near-stranglehold on its market, while Lumiere Place has several competitors. But the latter has scarcely made a dent in rival operations by Harrah's Entertainment and Ameristar Casinos. Nor, despite being smack-dab in the middle of the St. Louis waterfront, has it pulled significant amounts of business away from Casino Queen, across the river in Illinois.

Pinnacle has overspent and overcommitted itself -- and don't forget it nearly followed Columbia Sussex over the precipice in the feverish bidding for Aztar Corp. To Lee's considerable credit (no pun intended): A) corporate debt is below $1 billion; B) Pinnacle completely outfoxed Harrah's in their Lake Charles-for-Biloxi property swap; C) that Houston-fed market is rich enough to carry Pinnacle for the time being, and D) a clever if anti-competitive ballot initiative (for which Ameristar's Troy Stremming gets most of the credit) will entrench Pinnacle's Missouri position.

As 2009's gaming group goes, Pinnacle is faring better than all but a few. But it's made its share of MGM Mirage-like mistakes, just on a smaller, more-affordable scale. Pinnacle wasn't the only irrationally exuberant casino company during the 2005-07 boom but let's not go paint it as a paragon of restraint, either.

Deep within the septic tank that is the Las Vegas Review-Journal's online-comments section one finds the (very) occasional fact. In the case of the gaping void left at the Tropicana Las Vegas by the peremptory closure of Folies Bergere, longtime Vegas observer Phil Hevener had the following scoop: "One of the issues at the Trop was that the owners decided to leave the matter of a show for the new operator (Alex Yemenidjian) since show creators and hotel builders alike are having trouble finding money these days."

Not only does that have the ring of plausibility but when Hevener's got a tip, chances are you can take it to the bank. As for CEO Scott Butera and his underwhelming LV Trop administration, do you ever get the feeling they're just making it up as they go along?

Exit, pursued by a bear market

Fri, 17 Apr 2009 17:39:00 -0700

Aside from the occasional murmur by Wynn Las Vegas prexy Andrew Pascal, executives at Wynn Resorts keep a low (read: invisible) profile. Even the most assiduous follower of the casino industry would have trouble naming Wynn's CFO off the cuff. If you answered, "David Sisk," as of last Monday you'd be wrong. The contours of his golden parachute strongly suggest an involunatry exit, softened by at least $767,000 worth of severance pay, plus a limited-time offer of stock options.

One can't fault the generosity of Mr. Sisk's deal: He's to be paid a year's salary at pre-rollback rates and, from what little information is disclosed, it doesn't appear that he's bound to a non-compete clause. Odd that Wynn would do this without having a successor in the wings. Of course, there are more than a couple of ex-Las Vegas Sands and Harrah's Entertainment executives updating their resumés these days.

"Encore, me no like!" According to Majestic Research analyst Matthew Jacob, customers are having a tizzy over Encore's "chambered" casino layout and gravitating back to more traditional Wynn LV. So what plays in Macao may flop in Vegas, huh? You can't fault El Steve for trying. Jacob is predicting a squishy 1Q09 for Wynn Resorts, compounded by a first-ever patch of adversity at Wynn Macau.

Jacob is also the star of this CNBC segment on the gaming group, politely wiping the floor with Gabelli Global Multimedia Trust's Larry Haverty. The latter's declaration that resiliency in regional casino markets bodes an imminent recovery of Las Vegas, though we all wish it were true, is a textbook instance of 2+2=5.

Barring Atlantic City and the wholly aberrant phenomenon that is Illinois, regional markets have never slumped as badly as Vegas is doing and were much quicker to recover. Regional diversification is a double-edged sword for gaming: It's a valuable hedge against a wipeout in one key market, but it also gives customers that much less incentive to travel to Vegas or the Boardwalk when big-budget casino properties are coming closer and closer to home.

Haverty also goes off the rails vis-a-vis MGM Mirage's Aria and server-based gaming, predicting successful adoption at CityCenter will spur a wave of emulation. Yes, but ... not so fast. First, the economy will have to come firmly out of its present nosedive before casinos contemplate capex spending of that magnitude. Secondly, some of SBG's largest potential consumers -- like Harrah's Entertainment, Station Casinos, Las Vegas Sands and even MGM are so badly in hock that they're in no position to participate in a major replacement cycle. Furthermore, I don't believe International Game Technology expects more than, at most, an initially slow and incremental adoption of SBG -- an infiltration of casino floors, not a blitzkrieg. But if you're looking at IGT as a long-term investment, a drawn-out replacement cycle would probably be a more desirable scenario anyway.

There's nothing in exceptionable in Jacob's half of the interview. His more finely shaded and detailed observations contrast favorably with Haverty's scattergun generalizations. And while I agree with the latter's enthusiasm for Boyd Gaming, it's a mite premature to be toasting Pinnacle Entertainment. If Pinnacle hadn't gotten bogged down in Atlantic City and were making a more appreciable dent in the St. Louis market, then I'd raise my glass without reservation. When Pinnacle was in acquisition mode there were few assets for the taking. By the time that buffet was replenished, Pinnacle's plate was full to overflowing.

Case Bets: MGM Mirage, Harrah's, Wynn, Shuffle Master, Taxes

Tue, 17 Mar 2009 15:05:00 -0700

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.

"greed is good"

Tue, 10 Mar 2009 14:32:00 -0700

"To build what we had hoped to build in Atlantic City takes an era of dreaming. It takes an era where greed is good, we should all have a good time. We seem to be transported to Scandinavia: We have to hide our wealth, drive modest cars, conspicuous consumption is out. We live in an era where it's just not possible to build what we had anticipated in Atlantic City. Someday, hopefully it's a better world, or somebody shows up and offers us a better deal ... If we had an auction on that land, I'm not sure anybody would show up." -- Pinnacle Entertainment CEO Dan Lee, rationalizing his company's abandonment of its Atlantic City project.

"things we don't need"

Wed, 25 Feb 2009 11:12:00 -0700

That's the characterization of the Anaheim-to-Vegas mag-lev train purveyed by Louisiana Gov. Bobby Jindal, whose rote recital of stale policy nostrums and stilted, faux-folksy delivery have already been likened to Kenneth the page from 30 Rock. (For me the big laugh line -- delivered with intensely furrowed brow -- was, "Never forget: We.ARE.Americans." No? Really? Get outta here!)

So it appears the high-speed rail line is to going to replace the Mob Museum as the new inside-the-Beltway pincushion of choice. Because facilitating access to two our country's leading tourism destinations is so un-American and suchlike. Then again, Jindal opposed the ballot initiative that paved the way for Pinnacle Entertainment's Porte Cochere project in Baton Rouge, so his hosannas to enterprise capitalism need to be taken with a few grains of salt. It looks like we're dealing with another case of Coburn Syndrome here.

Also, on a personal note, what parallel universe does Jindal inhabit in which decisions about medical care "are made by doctors and patients"? Many's been the time when the methods my doctor could prescribe or the number of treatments I could receive (such as acupuncture for my fibromyalgia) were second-guessed or circumscribed by some pencil-pushing dweeb at an HMO. But since Jindal is big into faith healing, I'm guessing he doesn't figure we need that fancy-pants science-y type of curing anyway.

Trop's agony soon to end?

Wed, 18 Feb 2009 15:59:00 -0700

The bad news is that the New Jersey Casino Control Commission has voted to grant yet another extension on the interminable sale of the Tropicana Atlantic City. The good news that it's merely been pushed out another month, not the three that butterfingered trustee Justice Gary Stein wanted. The NJCCC finally seems to have run out of patience with this comedy of errors and past time, too.

Then again, the prospect of a Carl Icahn purchase concentrates the mind wonderfully. Since it's a credit bid, neither the State of New Jersey or former owner Columbia Sussex will see the payday they've been envisioning. But if Icahn can get his affiliated creditors to put their whole $1.4 billion in secured debt on the table, it'd crush anything Cordish Co. has offered or is likely to. The mere specter of Icahn has to be very bad news for Tropicana Entertainment CEO Scott Butera. Since the Trop is the engine that drives (or drove, before ColSux CEO William J. Yung III crashed it) his company's bottom line, Butera has been tireless in his quest to re-obtain the property. If he succeeded, it would also allow him to return victoriously to the market where he made his name as Trump Entertainment Resorts' boss. But, through no fault of his, TropEnt is in far worse standing in the Garden State than is Icahn.

If Icahn is primed to re-enter the casino industry that he left not so long ago, it's a positive augury both for Atlantic City and the business as a whole. It would also enable him to cock a snook at Pinnacle Entertainment, which purchased the old A.C. Sands from Icahn, quickly demolished it, then has been high and dry ever since. Under Icahn's ownership, the Stratosphere went from being a joke to a successful casino property. His taste in casinos isn't always pretty (Arizona Charlie's, anyone?) but it's proven smart and successful.

Missouri: Dough and "D'oh!"

Wed, 11 Feb 2009 17:34:00 -0700

Silly me. I had the Missouri numbers sitting in my "Inbox" all day yesterday and simply overlooked them amidst a typically frenetic day. A big "thank you" though to reader Bob Bradley, who provided the short and long versions (click on the "January 2009" link for a PDF). The mitigating factors cited in the sixth paragraph of the Post-Dispatch story (such as holidays and number of weekend days) should be taken into account when reading what follows.

The market was up 10% on the nose for January, validating not only Wall Street's renewed faith in regional gaming markets but also eradicating any remaining doubts that the state of Illinois is toxic to casinos. I admire Neil Bluhm's confidence in pursuing that 10th license but can't imagine why anyone would want to be in Illinois right now.

Pinnacle Entertainment's President riverboat has been a floating corpse for sometime now, so -43% comes as no surprise. An ever-so-slight decline at Harrah's Entertainment's Maryland Heights property is an unaccountable disappointment, though, given the liberalized rules that are driving revenue increases across the Show-Me State. Pinnacle's Lumiere Place, a distant third in St. Louis, still has a lot of catching up to do, even with Illinois practically shooing customers into its arms. Penn National, though, leapfrogged Harrah's in Kansas City, moving into the #2 spot. All three Isle of Capri boats posted gains, in a long-overdue piece of good news for that company.

Ameristar Casinos wasn't the biggest percentage gainer in either the St. Louis or Kansas City markets (that would be Lumiere Place -- which saw a 25% higher influx of foot traffic -- and Penn's Argosy Riverside, respectively). But in terms of sheer dollar amount, Ameristar remains the dominant operator in both. The future course of this company may be hazy but you have to admire how well they're maintaining the status quo.

Mixed message from Penn

Fri, 06 Feb 2009 12:10:00 -0700

Having pulled the plug on his latest Atlantic City venture, Penn National CEO Peter Carlino served the city a heaping plate of gloom with a side dish of pessimism. In fact, he pretty much slammed the door on the besieged metropolis, although his spokesman reopened it a wee bit.

Quoth Carlino: "I think as we've watched New Jersey, sadly, that's a market at the moment that is significantly less appealing to us, and that shouldn't be a surprise. There is much more bad news coming ... [Pennsylvania slot parlors are] nothing but bad, bad, bad news for Atlantic City. It's going to be a while, and maybe a long while, before the picture changes in Atlantic City. It's not a pretty picture."

In other words, he didn't just plunge a dagger into the heart of Atlantic City, he twisted it around a bit for good measure. Also, Penn's legal representative on the Boardwalk is a co-owner of A.C. nemesis Harrah's Chester. Coincidence perhaps, but the symbolism is painful.

Then again ... a Penn representative says the company will "evaluate the opportunity" as Bader Field continues to be shopped around. So Penn isn't really giving up on Atlantic City after all and Carlino's verbal barrage begins to sound like a "softening up" bombardment, preperatory to pushing for a better deal on Bader Field.

Carlino is right to wary of the potential threat from Philadelphia but anybody contemplating an Atlantic City investment is going to find themselves between that rock and the hard place that is the realization that new (or significantly refreshed) product and nothing else will suffice in A.C. Unfortunately opportunity -- the gnarled casino-development process in Philly -- and crisis, in the form of an economic deep-freeze -- have coincided, leaving the status quo drifting along.

There's a variety of low-hanging fruit in Atlantic City: the 14 acres MGM Mirage is peddling; Pinnacle Entertainment's stalled Sands site; the Tropicana; perhaps even Bally's Atlantic City or a management contract at Resorts Atlantic City, if the foreclosure goes through. Not to mention the Trump Marina sale, which seems to have devolved into slow-fizzle mode. But if Penn is sending a signal, it's translating as "Bader or Bust!"

Atlantic City: Two strikes, no balls

Thu, 29 Jan 2009 18:05:00 -0700

This was originally going to be "Death Watch VI" but three of those in a week is positively ghoulish. So, on to the latest disheartening developments from Atlantic City, the casino market that just can't catch a break.

Cease the revels! Taking a page from the Harrah's Entertainment playbook, Revel is calling a halt to interior work and will concentrate on finishing the exterior of the $2 billion resort. It had weathered the loss of several key executives in a plane crash and an attempted shakedown by Unite-HERE, but now it's basically running out of money. The possibility of a joint venture has now been floated. (Hey, Penn National, here's your chance to get onto the Boardwalk without having to buy the land or even put up most of the construction cost.) Starting a multi-billion-dollar resort project without all of one's financing in place may be standard practice, but it's caused project after project to go begging as Wall Street's purses snap shut.

It seems disingenuous, though, for Pinnacle Entertainment to cite Pennsylvania casinos as a potential reason not to move forward in Atlantic City. True, Columbia Sussex CEO William J. Yung III completely "misunderestimated" the Pennsylvania threat, but he wasn't the sharpest knife in the drawer when it came to running casinos and evidently never familiarized himself with the A.C. market. Pinnacle, they're supposed to be the smart guys, so they had to know full well what they'd be up against when they took a wrecking ball to the Sands back in '07. One would expect no less of them.

The cruel irony to all of this is that, during a time when casino development in Philadelphia has been deadlocked and ineffectual, buying precious time for Atlantic City, the economic crunch has sent project after project either into paralysis or onto the slag heap.

The New Jersey Casino Control Commission in executive session.

Trop the madness! If such a thing were possible, the Tropicana Atlantic City has even fewer slot technicians now than during the slash-and-burn ColSux days. And the techs have voted to strike, which may trip a rolling series of walkouts. Table game dealers would be the next ones out the door.

There's a mixed message coming from Trop HQ. President Mark Giannantonio insists he's been bargaining in good faith. But his hands may be tied by slowpoke trustee Justice Gary Stein, whose public posture has been that it would be unfair to the next owner of the Trop to be saddled with a labor contract negotiated by state-appointed interim management.

I agree, in principle. But in practice that admirable restraint has resulted in Trop employees being strung along while Stein takes his own sweet time getting a sale into place. A picket line would be yet another unfunny act in the farce caused by the New Jersey Casino Control Commission's lack of testicular fortitude when dealing with its dawdling surrogate. It should have told Stein to get the most viable deal and get the hell on with it 10 months ago.

Which is one more argument for taking a chance on Tropicana Entertainment CEO Scott Butera (a dice-throw that seems like less and less of a gamble by the day). When ColSux brinksmanship seemed to have the Tropicana Las Vegas headed for a strike, Butera brought the crisis to a swift and statesmanlike conclusion. He'd probably do the same thing in Atlantic City. It's a situation that calls for decisiveness, a quality not greatly in evidence right now.

Atlantic City Death Watch V

Mon, 26 Jan 2009 18:08:00 -0700

Joys, Shakespeare famously wrote, come as solitary spies while griefs arrive by the battalion. So it is with Atlantic City, where the bad news washes up along the Boardwalk in bunches. If you picked Resorts Atlantic City as the Casino Likeliest to Be Seized, you've just won the office pool.

In what would be an historic first, Resorts' mortgage holder wants Colony Capital -- which has missed three straight payments -- to surrender title to the property. Failing that, the New Jersey Casino Control Commission has been asked to sanction the seizure of the casino. And if Plan B doesn't work, Column Financial threatens to dispatch its agents on "cash sweeps" across the property. That's right, money could be commandeered straight from the casino floor in a forcible attempt to hold Colony to account.

If that seems harsh, imagine what might happen to you or I if we skipped 90 days' worth of house or car payments. Having snagged Resorts for a bargain-basement $140 million, Colony Capital proceeded to lumber it with 2.6X debt. It's the classic American story of our decade: mortgaged to the hilt, maxed out on the credit card and with no way to pay.

Should Column be successful in either of its first two proposed scenarios, it won't mean the end of Atlantic City's oldest casino. Colony's loss would become a nice little management contract for somebody else. (Maybe thrift-consicous soon-to-be-ex-Cannery Casino Resorts owners William Paulos and William Wortman should volunteer for the gig.)

With insolvency literally at Resorts' doorstep, the Tropicana in Chapter 11 and three Trump Entertainment Resorts casinos headed that way, Atlantic City faces a depressing prospect: Five of its 11 casinos could easily be in either bankruptcy or foreclosure by the end of next month. The market has boiled down to the Haves (Boyd Gaming, Harrah's Entertainment) and the Have-Nots (everybody else). As David Schwartz points out, while Pinnacle Entertainment may not have done itself a favor by tearing down the Sands, it probably kept the other small fry afloat that much longer.

Atlantic City Death Watch IV

Wed, 21 Jan 2009 17:49:00 -0700

Although Resorts Atlantic City, the Atlantic City Hilton and Trump Marina continue to circle the drain, they may have company. To wit ...

The fourth time's the charm. After three stints in Chapter 11, what's one more for Trump Entertainment Resorts? Something a journalist friend said six years ago remains as true as ever: "All Trump ever does is restructure his debt because that's all he can do!" Even if an(other) extension is granted, this company's obstacles look insuperable. And, pardon my saying so, but predicating your future in Atlantic City on building a casino in your primary feeder market (Philadelphia) makes almost as little sense as a cat chasing its own tail. Harrah's Entertainment tried something very much like that and it didn't work.

Layoffs return to Trop. This time it's dealers who'll feel the brunt. In Tropicana Atlantic City management's defense, it's wielding the cost-cutting knife far more judiciously than did its predecessor. Employee matching contributions to the health plan may be going up, but the lower-paid workers can still expect a salary increase. The more stringent belt-tightening is reserved for the top of the Trop food chain, with senior execs suspending their own 401(k) matching contributions. That's leadership by example, something a few other companies (coughStation Casinoscough) ought to have considered.

Bader Field -- to sell or not to sell? He may act crazy as a loon sometimes but Mayor Lorenzo Langford isn't wrong to want to take Bader Field off the market at a juncture when interest in the site has evaporated. Dangling it out there another six months is hardly likely to entice better offers.

Besides -- and much to Langford's vexation -- the State of New Jersey can nix any sale for which it doesn't care. That already happened when Penn National had an $800 million offer on the table. Penn thought there was enough Bader acreage to carve out four or five casino sites, keeping one for itself and making a tidy profit from the transaction.

Unlike the days of Steve Wynn's abortive Marina District venture, nobody's in the mood to give away land in Atlantic City anymore. At least Wynn -- presuming he's even still interested -- wasn't looking at it as a blatant 'flip' (an indiscreet admission by Penn that probably cost them the deal). And he can make a persuasive case, if he so chooses, that the economic benefits of a Wynn Resorts property in Atlantic City considerably outweigh the immediate gratification of an $800 million-$1 billion upfront payment.

Heck, given the farce that has befallen Pinnacle Entertainment's Boardwalk project, it'd be worth calling Dan Lee's bluff to see if he'd really take his ball and go home. Like Macbeth, Pinnacle is in so deep right now that it doesn't have much choice but to keep going forward. As for Wynn, he hasn't evinced much interest in Atlantic City lately. If he's gone cold on it since August of '07, he's got lots of company.

In retrospect, should the state have held its nose and signed off on the Penn National/Bader deal? The way history is trending, it's now looking like New Jersey cut off aforesaid nose to spite civic face. But it seemed like a good idea at the time: If Penn thought it could recoup $800 million-plus from reselling 75%-80% of Bader Field, legislators had reason to believe Atlantic City was getting lowballed.

From A(ztar) to Z(ilch)

Tue, 13 Jan 2009 16:05:00 -0700

If Tropicana Entertainment management's bankruptcy plan is accepted by the courts (one bond analyst thinks otherwise), former CEO/sole owner William J. Yung III will be left with -- what's the technical term? -- diddly squat. (So will his unsecured creditors, alas.)

Actually, he'll have less than nothing because he'll not only be forfeiting the remnants of his Aztar Corp. acquisition but also six TropEnt properties whose purchase predated the ill-starred Aztar buy. A portfolio cobbled together in bits and pieces over several years will be gone with the thwack of a gavel.

In which case, it will essentially close the book on The Worst Casino Acquisition of All Time, Bar None. Since Yung swung the Aztar deal by cross-collateralizing his motley fleet of casinos and riverboats, losing the Tropicana Atlantic City meant putting the whole kit 'n kaboodle up for grabs. Yung's dismissive attitude toward New Jersey casino regulations came with a $2.8 billion price tag.

Lighthouse Point: Last voyage departs soon.

I was going to write that no one in the casino industry will miss Yung, but he still owns the odd non-Trop casino, like the Westin Casuarina. So he's not going anywhere anytime soon.

The plan being for the secured creditors to roll their debt into TropEnt equity, one can see why CEO Scott Butera was at pains to complicate, stymie and/or outright thwart various asset sales initiated either by Yung or the New Jersey Casino Control Commission. As a Jan. 2, 2008 Morgan Joseph report pointed out, casino companies sell for higher cash flow multiples when peddled en masse, not piecemeal. For instance, Yung paid a whopping 11.3X EBITDA for Aztar, as compared to the 8.4X he plunked down for a Penn National castoff, the Belle of Baton Rouge.

So maybe Butera really thought he could land a higher price for Casino Aztar than Eldorado Resorts was offering or perhaps he just wanted to queer the deal that was on the table. Either way, the endgame was the same: more money. Since his plan hinges partly on regaining control of cash cow A.C. Trop and Casino Aztar, neither of which is a given (and one of which is exceptionally unlikely), TropEnt is still a long ways from being out of the woods.

Tropicana Las Vegas: Same this year, same next year, same in 2013.

Thinking positively, if Butera can't -- as seems inevitable -- get the Boardwalk property back, he can redirect money planned for Atlantic City upgrades into that eternally deferred Tropicana Las Vegas facelift. There's a case to be made, if not much of a case, for New Jersey to brush aside the $550 million offered by Cordish Co. for the A.C. Trop -- particularly if Butera were bound to the same conditions the Division of Gaming Enforcement recommended imposing on Yung 14 months ago: a one-year probationary license and a 26-point set of benchmarks.

But the Garden State is so revenue-parched that it's unimaginable it will tell Cordish to keep its money. And whatever tenuous faith the NJCCC might have in Butera won't necessarily be bolstered by his turnaround plan. The document makes some concrete promises (including $153 million in A.C. Trop upgrades), and its property- and market-growth projections are mostly conservative. For instance, Butera clearly harbors no illusions about the difficulties ahead in Baton Rouge, where Pinnacle Entertainment has a new riverboat coming over the horizon. God bless him, he's an optimist, though: Who else would postulate five straight years of single-digit revenue growth in Atlantic City?

But Butera's strategy posits revenue growth within the context of relatively flat operating and maintenance budgets. Some outright reductions, at least, can be attributed to the cessation of operations at Lighthouse Point in 2009 and Horizon Tahoe two years later. Were it not for that, Butera's numbers would look like something out of the Bill Yung playbook. In fact, certain of the promised reforms, like "Optimize [read: "tighten"] ... slot hold," centralized corporate purchasing and "utilizing third parties for certain services" are purest Yung. Others, such as a Nevada-wide loyalty-card program, appear to be new. (But why stop at Nevada?)

As for a reinvention of the Vegas Trop, don't expect anything before 2014, at the earliest. Likewise, the overdue replacement of Casino Aztar just isn't in the budget. It's a lean regimen for grim times, but give Butera this: He's not spending money he doesn't have and now the creditors to whom he is answerable will be literally invested in improving TropEnt's performance ... if they hope to see their money again.

21

Wed, 31 Dec 2008 11:39:00 -0700

That's the number of predictions for 2009 issued by Spectrum Gaming Group, an Atlantic City-based outfit. They are, in no particular order:

• Advancements in technology that impact revenues and cut costs will continue to be attractive to operators even in an economic downturn.

Continued ...

• ... conversion of racetracks to racinos, as well as non-gaming expansions to existing racinos.

• ... elimination of jobs, both through cuts and attrition.

• ... moratorium on development of big-box gaming resorts due to economic downturn.

• Convenience-based gaming continues to achieve better year-over-year results than destination-based gaming.

• Corporate and property debt restructuring in wake of declining revenues.

• Eastern European countries will increase their efforts to meet EU regulations, including smoking bans.

• Gaming companies increase efforts to export their brands globally.

• Gaming equipment manufacturers continue to invest in games that appeal to a younger demographic, including lotteries, bingo and server-based technology.

• Increased legislative acceptance of allowing the deduction of issued electronic promotional gaming credits from the gross revenue tax/fee calculation.

• Increased use of electronic games, including the emergence of scalable electronic table games in which players at different locations on the floor wager on a single outcome.

• Increasing alliances between commercial gaming operators and outside investors, as well as between commercial and tribal operators.

• Internet gambling in U.S. will be a hot federal issue for the new administration and Congress; gaming companies will fund lobbying efforts on both sides.

• Major gaming operators commence deleveraging by selling off properties to emerging operators.

• More pronounced shift in market share among suppliers as operators attempt to shift away from IGT participation games.

• Native American tribal gaming revenue estimates remain on track to surpass U.S. commercial gaming totals.

• Prices for hotel rooms, shows and food and beverage will return to lower levels at large gaming resorts as operators need to fill their properties.

• Slow but continual advancement toward server-based gaming, as operators remain skeptical as to the potential financial returns on investment.

• States consider expanding or legalizing casino-style gaming to help fill state budget gaps.

• Support from China to ease visa restrictions, increasing flow of visitors into Macau.

• Uncertainty in various European countries concerning regulation, thus increasing cases being referred to the European Court of Justice.

We'll have to check back in a year, God willing, and see how clear Spectrum's crystal ball proved to be. There's nothing on that list that strikes me as off the beam and much of its seems dead on target. The only "WTF?" comes courtesy of a Spectrum exec who told a reporter, "In times like this, it's not like these are company-specific problems that can be attributed to some glaringly bad decision by the company."

I respectfully beg to differ. Choosing unreliable and/or overcommitted business partners (Boyd Gaming) was a decision. Opening in far-flung markets while your core properties were losing market share (Isle of Capri) was a decision. Taking on preposterous amounts of debt (Harrah's Entertainment) or simply assuming more debt than your cash flow and lavish spending tendencies can support (Station Casinos) were decisions. Trying to build metaresorts all at once (Boyd, MGM Mirage) was a decision. Rashly demolishing the Atlantic City Sands and thereby leaving yourself with empty, non-revenue-producing land (Pinnacle Entertainment), that's a decision.

Launching major projects that aren't fully capitalized (Las Vegas Sands, Cosmopolitan, Majestic Star) is a decision. Stubbdornly jeopardizing the license of the property that generates 40% of your cash flow (Columbia Sussex) is a decision. Making not one, but two major acquisitions at a time when your cash cow -- slot routes -- is giving less milk and then overpaying for some of the new assets (Herbst Gaming) is a decision.

Opening a $2.3 billion, years-in-the-making megaresort at the nadir-to-date of the economy (Wynn Las Vegas)? Now that, that was not a decision. That's playing the hand you were dealt.

Pinnacle's Bahamas debacle

Fri, 19 Dec 2008 18:22:00 -0700

It wasn't so long ago that Pinnacle Entertainment was the fair-haired boy of the casino industry, especially after it hit a home run in the Lake Charles, La., market with tony L'Auberge du Lac. Then it nearly followed Columbia Sussex over the precipice in the crazy Aztar Corp. bidding war. Its much-anticipated Lumiere Place in St. Louis is now regarded as a succes d'estime, a budgetary overindulgence. (It's certainly failed to make any significant dent in proximate Ameristar Casinos and Harrah's Entertainment operations.)

Pinnacle paid a bundle to agglomerate land on Atlantic City's Boardwalk that it now can't afford to develop -- and may be regretting the precipitate fashion with which it shut down and demolished the Sands, which could have been generating a modest revenue stream all this time. A Baton Rouge riverboat project is behind schedule, and now ...

Isle of Capri Casinos and Harrah's now can welcome Pinnacle to the club of U.S. casino owners who have found nothing but a dead end in the Bahamas. (In fairness to Harrah's, it never got a chance to operate there, its Baha Mar project having fallen victim to internecine plotting and counterplotting that still haven't been sorted out.) The torrent of red ink from Exuma has done a number on Pinnacle's bottom line, which really doesn't need any more bloodletting right now.

It seems that Pinnacle decided last summer to either sell or outright close its casino on Exuma and will draw the blinds on Jan. 2 (which tells you just how bad business must be). Given that the Bahamas also turned out to be a fiscal graveyard for "Pile of Debris" (one of the bad decisions that ushered out the Goldstein Era), no wonder Pinnacle's Exuma casino is wanting for takers. Yes, they couldn't even get James Packer to take this turkey, so things must be very dire indeed. The ill-starred property has even been purged from Pinnacle's corporate Web site. "Bahamas casino? What Bahamas casino? No, we never had one of those. Where did you read that?"

I'm tempted to say this is the end of U.S. casino operators trying to reinvent the Bahamas as a market for Vegas-style gambling. But this is an industry with no shortage of persistence and optimism, mostly justified but sometimes not.

Last-minute reminder: The final episode, "Vegas" of Stargate Atlantis -- partly shot on the Strip -- airs tonight at 9 p.m. Eastern and Pacific. I'm just sayin'.

Case Bets: Harrah's, Pinnacle, New Frontier, Treasure Island, misery in Macao

Fri, 19 Dec 2008 15:32:00 -0700

Harrah's Entertainment picked a heckuva time to put its Memphis campus on the market.

Robo-poker invades Bossier City and at a Pinnacle Entertainment property, no less. I expected better of Pinnacle. PNK'd again!

No answers from El Ad. I ran into a representative of El Ad Properties last night at Eastside Cannery. As much as I badgered the poor man, I could get little information on what's happening with the New Frontier site (or where $615 million of the advertised $1.24 billion purchase price went). El Ad's position is that it's content to sit upon its 18.4 acres until the market grows more propitious or Hell freezes over, whichever comes first. (OK, I made the second half of that statement up.) And why not when you've got Steve Wynn doing your landscaping for you.

Treasure Island employees had better snap to it when Phil Ruffin takes over. Other gems gleaned from this story: Jack Binion had been sniffing around certain MGM Mirage properties but was rebuffed. (Bad call -- Jack's pretty flush these days.) And if you think the El Ad/New Frontier situation is bad, it could have been far worse. Ruffin had James Packer, the single unluckiest investor in the casino industry, on the hook before El Ad brandished its billions.

"Asia's Las Vegas"™ is starting to sound like real, present-day Vegas in all the wrong ways.

Collapse in Kansas; Herbst is toast

Fri, 05 Dec 2008 11:20:00 -0700

And then there was one.

A Cordish Co./Kansas Speedway joint venture has pulled the chicken switch on a $400 million casino project. This leaves avionics firm Butler National Service Corp., with its Dodge City concession, as the only company with an ongoing casino project in Kansas -- Penn National, Harrah's Entertainment and now Cordish having walked away from the other three concessions. Project head Joseph Weinberg wants to build a casino-first, amenities-later version of what had been proposed. Of course, in order to do that, the bidding process will have to be re-started from scratch. Also, Weinberg's plan assumes that Cordish gets the nod a second time and, were I a member of the Kansas Lottery's board, I'd be getting pretty fed up with the diva-dom displayed by some of the casino applicants.

On the other hand, if a company as well-regarded as Cordish can't get its Speedway casino financed, that makes it easier to excuse Harrah's exit from the Sunflower State. The Lottery says it is willing to"invite applicants to apply with proposals they feel fit the current economic climate." [read: "smaller budgets"]. That, combined with the sudden availability of Sumner County, opens the door wide for Penn National. If the Lottery's board wants to give Penn the Sumner/Cherokee County parlay it requested (and lower the budget for the latter), Penn is the one company that could execute the projects out of cash on hand. Or is it saving its pennies for a Vegas Strip property now?

Across the border, the clever chaps at Pinnacle Entertainment have found a loophole in Missouri law that might enable them to open yet another casino market. Revenues at the old President riverboat, on the St. Louis waterfront, are down somewhere in the bilge water. But Pinnacle has a discrete gaming license for the ship and an option on some land toward the northern end of St. Louis, near the Chain of Rocks Bridge. There, it proposes to essentially dry-dock the President.

Since Missouri law doesn't expressly forbid what Pinnacle is contemplating, the company could open a new market in the state, even though the number of licenses remains frozen at 13. Smooth move. But it's not one that's going to sit well with the backers of Sugar Creek and Cape Girardeau projects that were frozen out when Missourians voted for the license cap last month. And it underscores the perils of shutting the door to new competition, as Pinnacle and Ameristar Casinos are beginning to treat Missouri as their private fiefdom.

Already, Ameristar veep Troy Stremming -- the architect of the freeze -- is huffing that Missourians dare not let Sugar Creek get into the game: “We don’t want to get into a situation where we are over-saturating the market and cannibalizing existing destination facilities.” No, but it's hunky-dory to let Stremming's buddies at Pinnacle have three St. Louis-area locations instead of their current two. No oversaturation or cannibalization there, huh? At least Stremming won't have the casinos-in-Kanas bogeyman to brandish anymore, now that all but one of those projects has collapsed.

Hope for Harrah's. The Chinese government is experimenting with parimutuel wagering on horse races. If the ChiComms can be persuaded to extend the sport of kings to Macao, maybe Harrah's can make serious use of that golf course it purchased and which is now ineligible for casino development. Frank Fahrenkopf couldn't resist mentioning that white elephant during his joint appearance with Harrah's CEO Gary Loveman during G2E. Judging from some of Fahrenkopf's subtle rapier thrusts and Loveman's harrumphing response, there seems little love lost between the twosome.

Herbst Watch, Day Two. The Magic 8 Ball (in the guise of Liz Benston) says bankruptcy likely for Herbst Gaming, which is in default on $1.27 billion of debt. This has been in the cards for Herbst ever since it got taken to the cleaners by MGM Mirage for some Primm, Nev., casinos that had seen better days (like, maybe 10 years ago). Benston's description of the $394 million boondoggle is "ill-advised." Understatement doesn't get any better than that, my friends.

Case Bets: Ho Tram, Shuffle(d) Master, Ameristar

Tue, 18 Nov 2008 12:17:00 -0700

Tout le monde may be at G2E (albeit 10% less le monde than last year, I'm told) but the big news is happening elsewhere.

MGM Mirage has emerged as the "angel" for the Ho Tram Strip in Vietnam. It's a sweet deal for MGM, as Mike Aymong's Asian Coastal Development Ltd. ponies up the $4.2 billion construction cost, while MGM lends its brand name and operational expertise (in return for a fee) to an 1,100-room hotel but is spared any exposure. ACDL will also receive the benefit of MGM's marketing abilities. An empty stretch of Vietnamese beachfront suddenly looks a great deal more like a viable resort project.

Per Joel Bergman's remarks, given on Monday, about MGM putting property on the block, Marketwatch confirms it. MGM President Jim Murren says "non-core assets" are for sale, including undeveloped land on the Strip. So maybe City Center II, including "Atlantis Vegas" isn't happening after all.

Shuffle Master gets shuffled. The deck of executive cards at Shuffle Master just got run through the shoe. Senior VP Brooke Dunn is being placed on leave, at least for now. The SEC is recommending civil litigation against him pursuant to alleged insider trading. Dunn's accused of tipping an unidentified third party to Shuffle Master inside dope.

Splitting kings. The chairman and CEO roles at Shuffle Master are being cleaved apart, with board member (and former Greenspun Corp. exec) Phil Peckman assuming the chairman's gavel. Outgoing CEO Mark Yoseloff stays in that role, as the company's search for a replacement continues ... and continues. Presumably to further ensure stability, three veteran Shuffle Master execs -- Perry Lopez, General Counsel Jerry Smith, and Roger Snow -- have all been named executive veeps.

Ameristar Casinos continues to run up the white flag, laying off over 5% of its Missouri workforce. This is ironic, considering that Ameristar was the author and prime backer of the constitutional amendment that will remove the state's "loss limit" -- a change that will redound to Ameristar's financial benefit. Although the amendment's passage is expected to widen the gap between the "haves" (Ameristar, Pinnacle Entertainment, Harrah's Entertainment) and the "have-nots" (Isle of Capri and several independent operators), Ameristar is acting like it came out on the losing side.

God is his trigger man

Fri, 14 Nov 2008 15:59:00 -0700

In an edifying moment for civics students everywhere, Atlantic City's mayor of the moment, Lorenzo Langford took the mike and proclaimed that if you're gonna throw down on him, the Man Upstairs has his back: "Plot and plan against me, if you will. But remember, there is a God in heaven plotting and planning against you."

As an understandably jaundiced David G. Schwartz observed, "I like how there’s no longer even a pretense of serving the people of Atlantic City: it’s all just about getting power and holding on to it."

Better still, if you're hoping to bid on Bader Field, this is who you're going to have to deal with -- a mayor who talks like a deranged Roman emperor. And who followed his God's-gonna-bust-a-cap-in-your-ass speech with a City Hall bloodbath.

And to think that Jo Schmoe, Slot Attendant, can't run for office in Atlantic City on account of she works in one of them crooked casinos, y'know. We've gotta keep those dangerous characters out of the system.

Atlantic City PNK'd. I've got to thank Dr. Schwartz for that headline, inspired by Pinnacle Entertainment's latest rebuff to the Boardwalk, which took place last week. Its $2 billion megaresort is on "indefinite hold,"perhaps for years. CEO Dan Lee had a litany of excuses to deploy, up to and including slots in Maryland, which is a pretty feeble line of argument when you consider that Marylanders would have to pass up racinos in Pennsylvania and Delaware to get to Atlantic City. Oh, and then there's Bader Field and Aqueduct in New York and casinos in Pennsylvania and ... and ...

Lee apparently didn't cite Atlantic City's partial smoking ban but it was surely on his mind. Some of the competitive pressures Lee did index are nothing new, which makes you wonder why Pinnacle went so aggressively into Atlantic City, demolishing the old Sands and bullying landowners who didn't meet its price for their real estate. Like several other companies, Pinnacle seems to have taken the go-go euphoria of 2005-06 for the norm and is now experiencing a rude awakening.

Pinnacle used up a lot of good will on the Boardwalk and I don't get the feeling there's much sympathy now that it's stranded in midstream. As for receiving an attractive offer for its Sands acreage ... doubtful. The city is suddenly having difficulty finding takers for Bader Field, plus MGM Mirage's Marina District land -- a far more attractive parcel -- may soon be up for grabs. And that's not even a full inventory of potential casino sites.

I've been giving Pinnacle the benefit of the doubt for a while now, but I'm prepared to join Prof. Schwartz and call "B.S." on this project. I'll be happily surprised if Pinnacle gets the project off the launching pad. Happy, but surprised nonetheless.

It took a couple of years but finally Morgans Hotel Group got around to exercising its right to franchise the Hard Rock brand west of the Mississippi. And the lucky winner? Cherokee Casino Resort, near Tulsa. Maybe if Morgans had been more aggresssive with those franchising rights it obtained when it bought the Hard Rock Hotel & Casino, in Vegas, it wouldn't have had to turn around and sell 8/10 of the HRH back to the bank.

Indiana: It's all relative

Tue, 11 Nov 2008 13:07:00 -0700

Sifting through my massive pile of unwritten Questions of the Day and unstudied analyst reports, we come to Indiana's October revenues. Ultimately, whether any particular metric is good or bad depends on context and perspective.

To start with the big number, revenue was up 14% from October '07. But that turned into a 1% decline once new racinos Hoosier Park and Indiana Park were sifted out, and goes even lower if you minimize the numbers from the recently augmented Horseshoe Hammond. So, whatever "bounce" Indiana is getting from the smoking ban in Illinois, it's being diluted by gambling expansion within the Hoosier State. So it's good for tax coffers, not so good for individual operators.

Harrah's killed with Horseshoe Hammond, which is more like an aircraft carrier with slots than a casino. But it proved a potent "one-ship task force" (a sometimes sacrcastic nickname given the U.S.S. Boise after it claimed to have sunk six Japanese ships at the Battle of Cape Esperance), more than making up for declines at Horseshoe Southern Indiana. Hammond revenues went up 52% and Harrah's overall take rose 20%.

Despite the panicky attitudes manifested of late at Ameristar Casinos, its East Chicago property was off but 3.5%, despite the Horseshoe Hammond factor, which ate far worse into Don Barden's Gary, Ind., flotilla.

What to make of Blue Chip? To see the glass as half-full, the double-digit revenue declines that began in August '07 are slowly starting to narrow. Business has been off as much as $10 million year/year, and October's 18% decline comes atop a 22% declivity the year before. But it looks like Blue Chip is going to bottom out at 60%-65% of its former market share. And it was Indiana's seventh-winningest casino in October, keeping Boyd Gaming out of the bottom tier.

Down south, only Casino Aztar showed revenue growth (5%), which continues to validate current management's aggressive mindset -- but business still hasn't returned to pre-Columbia Sussex levels. As for French Lick, so long hyped as a casino destination, so greatly anticipated, it has proven Indiana's most disappointing market. It's the least-lucrative in the state and continues to give indications of having peaked.

Slots are tight at Belterra. How else to explain a 10% win increase on -14% handle? The last time somebody managed a feat like that He fed a large crowd with but a few loaves and fishes.

Casino Vote '08: Dan Lee's the big winner

Wed, 05 Nov 2008 16:36:00 -0700

JP Morgan has proclaimed Pinnacle Entertainment "the biggest winner this election day." By voting to both lift the cap on buy-ins and the close Missouri to additional casinos, Show-Me State voters delivered a gift to Pinnacle CEO Dan Lee, who has massively invested in the greater St. Louis market and can now reap the benefits of higher wagers and artificially limited competition. Anybody contemplating the investment risk that Pinnacle has been lately (with at least $2.85 billion in outstanding projects) can sleep a little more soundly tonight.

But, as Morgan analysts point out, the stomping of a pro-casino initiative in Ohio redounds to the benefit of Pinnacle's Belterra casino (and Penn National's Argosy Lawrenceburg riverboat). While the Ohio vote reflects a certain amount of anti-casino sentiment, this was one of those ballot measures where the devil was in the details. It polled well in the immediate region, which has been hard-hit with job losses (5,000 of which casino backers promised to replace) but it was "no sale" upstate. An otherwise leftward-trending electorate was unpersuaded.

Specifically, there was a "trap door" in the enabling language that might have let Lakes Entertainment slip its tax obligations if tribal casinos open in the Buckeye State (a long shot, but one voters weren't willing to hazard), not to mention that the casino was to be allowed to operate with scant oversight. Oh, and the license fee ($15 million) wasn't chicken feed, but it's considerably less than what casinos are ponying up elsewhere -- like Kansas -- where no monopolies are promised. The face-saving spin was that "misleading ads" were to blame -- like that's anything new in politics.

Details were the bane in Maine, too, where Olympia Gaming found itself on the losing end of a casino plebiscite. Maine voters have taken a go-slow approach to casino expansion in their state, also voting down a racino at Scarborough Downs. There also seems to have been some "payback" involved -- from Down Easters who had seen their own casino aspirations crushed five years ago. If they couldn't have a casino, those upstart resort communities were going to be SOL, too. So there!

Pat LaMarche expresses her considered opinion of Maine's electoral process.

Lowering the legal gambing age to 19 stuck in voters' craw, as did certain other special privileges which were to be extended to the Oxford County casino and to Gary Goett's Olympia. Project booster Pat LaMarche sniffed that folks in Maine were "very unfriendly" and says she's going to take her ball and LaMarche right next door to New Hampshire.

On the other hand, LaMarche is the bete noire of intolerant religious wack jobs, so that's something in her favor.

Having a win/win day, was also the good fortune of Ameristar Casinos, which will see some relief in Colorado, in addition to prevailing in Missouri. In return for helping the state's community-college system, Colorado casinos get some new goodies that -- we hope -- will ameliorate the effects of the state's smoking ban.

It's a mixed bag, albeit more positive than negative, for Penn National. It headed off the Ohio threat but finds its flagship property in West Virginia facing competitive pressure not only from Pennsylvania but soon from Maryland, even though the latter's ramp-up is roughly four years away. Penn astutely protected its flank by optioning strategically placed real estate near Baltimore, in its first move after its LBO imploded last summer.

(Amusingly, both sides in the Maryland fight used President-elect Obama as a "product placement" in their literature. They knew a good "branding opportunity" when they saw one.)

Hopefully the Maryland Lege will revisit (read: reduce) the confiscatory 67% tax rate. Otherwise, brace yourself for Ye Olde Shack O'Slots, as no sane businessman would invest heavily in a casino with such a narrow operating margin. By establishing a Maryland beachhead, Penn is probably thinking more in terms of capturing "leakage" from its other nearby properties, not having visions of $$$ dancing in its head.

Former governor, sometime racino proponent and "Casino Jack" Abramoff beneficiary Robert Leroy "Bob" Ehrlich Jr. (R) hoped to "see us kill this turkey," but that sounds like sour grapes from the one-term blunder, er, wonder. Gov. Martin O'Malley (D) moved the ball across the goal line with 59% support, whereas Ehrlich couldn't get it upfield in four tries -- even in the post-9/11 economy. It may nearly be Thanksgiving but the only turkey in sight is Ehrlich (or is that a thinly disguised Steve Carell?)

Speaking of "Casino Jack", add him to the "losers" column of our S&G "Winners & Losers" with a capital "L." From the jailhouse, convicted felon Abramoff tried to 'Swift Boat' his archnemesis, John McCain, but the effort sank without leaving the pier. What a schlemil.

Loose change: Voters also gave their assent to a lottery in Arkansas and expanded table games at Greenbrier Resort in West Virginia. So I'd score that as two lost battles (Ohio, Maine), one decisive victory (Maryland) and incremental wins in four other skirmishes.

On balance, a good day.

Winners & Losers

Wed, 05 Nov 2008 13:52:00 -0700

And now the obligatory post-Election, What's-it-all-about-Alfie roundup ...

Culinary Union 1, Casino CEOs O: True, the Culinary tripped all over its own feet in the early going, leading to Democratic caucuses that weren't so much "Barackular" as "debacular." But D. Taylor & Co. backed the winning horse and did it early, which earns some chits down the road, plus they have a new Capitol Hill friend in Rep.-elect Dina Titus. Messrs. Lanni, Loveman, Wynn, Adelson and Trump made a variety of presidential wagers, losing every one.

Ameristar Casinos/Pinnacle Entertainment: They wanted a protected oligarchy in Missouri and now they've got it -- and at relatively little additional tax burden to them.

Slot manufacturers: OK, so Ohio and Maine didn't come through and the Missouri market is frozen. But 15K new slots in Maryland ain't chicken feed. Plus a West Virginia casino expansion that flew under the radar got voted in. Inexplicably, slot stocks traded downward. Stupid Wall Street.

Colorado casinos: They didn't so much "win" as get a hefty lifeline thrown to them by Rocky Mountain State voters who approved 20X higher betting limits, 'round the clock operations, and roulette and craps. (No Sen. John McCain sightings in Cripple Creek yet, though.)

Freedom's Watch: So far F-Double-U is 6-9-1 (with Sen. Gordon Smith [R] of Oregon momentarily in the "tie" column) in its top-priority races. I'm feeling generous and crediting the Adelson front group with "wins" in the case of self-destructing Rep. Tim Mahoney (D-FL), who continued the scummy tradition of predecessor Mark Foley, and in that of Sen. Saxby Chambliss (R-GA), who faces a December do-over, thanks to Georgia law. And veering off at the last minute to spend money attacking not-up-for-reelection Sen. Chuck Schumer (D-N.Y.)? Adelsonian political acumen at its finest. Winner? Loser? Let's call it a draw.

Poker: Just when it looked like the poker phenomenon was about to jump the shark, we've got a poker-playing president-elect. I dunno if Ms. Pelosi and Messrs. Reid, McConnell and Boehner cotton to hashing out legislation over cigars, booze and a deck of cards, but they'd better get ready for a whole new kind of "smoke-filled room."

Online Poker: Chances for a repeal of the UIGEA suddenly look a lot better.

Karma: Bearing false witness and serial adultery remain very uncool. But multiple felony counts and assorted other financial malfeasances remain A-OK with voters of both parties. (Hint: If Ted Stevens has to be forcibly removed from office, start practicing the phrase "Senator Palin." Kinda trips off the tongue, don't it?)

Gays & Lesbians: Voters in California stuck it to one of Vegas' most loyal constituencies big-time, passing the hateful Proposition 8. Were Nevada not so socially conservative (although compassionate enough to have legalized medical marijuana a ways back), I'd say we should vote for gay nuptials here, then sit back and gloat as the bucks roll in.

Tom Tancredo and ilk: Even if you abhor George W. Bush, you've got to give it up for his ability to rally Hispanic voters to the GOP standard. (I can't speak for Biloxi-Gulfport or Atlantic City, but Las Vegas can't function without its Latino labor base and casino CEOs know this; that's why immigration is their "third rail" of politics.) I always thought the immigration issue would be a non-starter in this election -- and it was. But the Tancredos of the GOP, by ginning it up in both '06 and early '08, antagonized Latinos, scored an own-goal and eradicated the gains Bush made with this voting bloc. So, in lieu of a prolonged post-mortem, maybe Republicans should just burn Tancredo in effigy and then turn the page.

Gaming's GOP influence: The annihilation of GOP moderates at the national level is largely complete, leaving an electoral map that looks a lot like the Confederacy, plus a horseshoe-shaped chunk of the West. Subtract Mississippi, Louisiana and tribal casinos and you've got slim pickings there. Gambling-friendly Republicans like Govs. Haley Barbour (MS) and Charlie Crist (FL) have made progress, but not easily and not without much expenditure of political capital. It's difficult to see where American Gaming Association boss Frank Fahrenkopf goes within his own party when he needs its support. The casino industry's investment in the GOP has yielded scant ROI.

Gov. Jim Gibbons: With state Sens. Joe Heck and Bob Beers, and Rep. Jon Porter all packed off to early retirement by their constituents, Gibbons suddenly has much less to fear from within his own party two years hence. (Ditto Porter's designs on Sen. Harry Reid's [D-NV] seat.)

Rep. Dean Heller (R-NV): If he opts to challenge Reid -- or Gibbons -- he's now the presumptive frontrunner. (I still think "Gov. Oscar Goodman" has a nice ring to it.)

North Las Vegas Mayor Michael Montandon (R): He's laying the groundwork for an intra-party challenge to Gibbons. Montandon's ably managed growth in NLV and would easily trump Gibbons on the "competence" front. The sudden political demise of Beers, Heck and Porter gives him a clear field of fire.

Tourists: Ever hospitable, Clark County voters gave them the finger, by endorsing a 2%-3% hike in the hotel tax. Thankfully, it's just an advisory vote.

Joe the Player: Winner. Clinton-era tax rates are coming back, which may hurt the "whales" but should be good for the rest of us. The Clinton administration coincided with halcyon years of casino growth, especially in Vegas and on the Gulf Coast. The succeeding eight years were dominated by M&A binges, condomania and a narrowing of the Strip's economic appeal toward the monied elite -- the latter being a very sore point among casino consumers. Vegas-wise, which eight years would you choose?

Jon Ozark: This cardboard dummy was wheeled into Nevada Assembly District 21 by local monied interests, to knock off Asm. Bob Beers -- not be confused with the less-hirsute state Sen. Bob Beers -- for having the audacity to stand up against Steve Wynn, he whose name dare not be pejoratively uttered in Carson City. That much having been accomplished, in the general election Ozark discovered once again that it takes more than a pretty face to win. Good luck in your next district, Mr. Ozark. They say the third one's the charm.

Missouri amendment to pass: JP Morgan

Mon, 03 Nov 2008 13:36:00 -0700

Analysts at JP Morgan like the chances for a Missouri constitutional amendment largely bankrolled by Ameristar Casinos and Pinnacle Entertainment. While Ameristar stands to benefit in tangible ways, JP Morgan focuses on what it could for Pinnacle: a 15% increase in Lumiere Place cash flow and perhaps another $2 per share (at $5.41 as of this moment).

Other takeaways from today's investor note: 1) Lake Charles, La., which Pinnacle dominates, looks good to buck the national trend and keep growing its casino revenue; 2) the heretofore disappointing Lumiere Place is at "an inflection point" in which its Four Seasons hotel starts to become a contributor instead of "a drag on earings"; 3) Pinnacle is holding its ground, at Belterra, better than most of its southern Indiana competitors -- Penn National's Argosy Lawrenceburg in particular.

There's still the matter of the $600 million River City project in suburban St. Louis and Pinnacle's stymied Atlantic City megaresort. Pinnacle appears to have let spending get pretty exuberant (only in its $250 million Baton Rouge riverboat casino do budget and market really seem to square up), so it'd premature for CEO Dan Lee to take any victory laps -- not that it would be in his nature.

Update: Only in the convoluted logic of the Las Vegas Review-Journal would a constitutional amendment that bars new casinos from Missouri be blithlely described as "Gaming expansion." So, if Ohio voters approve Lakes Entertainment's proposed casino, will that be "gaming contraction"?

'Show Me' more money

Fri, 31 Oct 2008 11:49:00 -0700

Missouri voters are being asked to approve a constitutional amendment, submitted by Ameristar Casinos executive Troy Stremming, which would make a couple of significant changes in how business is done in Show-Me State casinos. (The full version is here, but the précis tells you what you most need to know.)

There are three salient features to this amendment, which might be summarized as The Good, The Bad and The Neutral.

The Neutral: Taxes on casinos would be raised 1%, for a total rate of 21%. In and of itself, this is not such a big deal, as I'll explain below.

The Good: The amendment repeals the state's loss limits, a paternalistic measure which doesn't actually limit how much you can lose (like that's any of Jefferson City's beeswax) but how frequently you can buy in. This should have been history a long time ago or, better yet, never enacted.

The Bad: The amendment would close Missouri to new casino licensees. Anybody already licensed or building in Missouri (read: Pinnacle Entertainment) would be grandfathered. After passage of the amendment, the only way into Missouri would be if an existing riverboat were sold, went out of business or lost its license.

That's a pretty sweet deal, especially if you're Ameristar and probably want to bat your eyelashes at potential suitors. Ameristar's two Missouri casinos did a combined $160 million in cash flow last year and the company, using its 2007 financials, is conservatively worth $2.1 billion. A freezing of the Missouri market would make Ameristar more valuable still.

But the amendment anti-competitive on its face. Nor have I heard any compelling argument for closing Missouri to additional operators -- other than protecting the ones already there from an environment that will be somewhat more competitive as Kansas' casinos begin to enter the fray.

And ... this may be more cracker-barrel philosophy than economic theory, but if Ameristar, Pinnacle, et. al. are going to enjoy protected-oligarchy status, the citizens of Missouri ought to get more than an extra percentage point of tax from those sinecures. If voters are being asked to slam the door in the face of prospective casino developers (such as one in Cape Girardeau), then existing operators ought to reciprocate by agreeing to a new tax rate that's not one but several points greater.

As it stands, the best-case estimate is that the 1% increase will bring an extra $156 million per year to state and local kitties. Ameristar's riverboats alone represented $117 million in gaming-tax revenues last year. Missourians will have to weigh the $156 million bird in the hand against the bird-in-the-bush economic impact that one or more additional casinos would represent. For once, I'd take the bird in the bush.

Correction: Yesterday, I passed along a Center for Responsive Politics assertion that presidential campaign donations from the defense industry favored Sen. John McCain. According to OpenSecrets.org, it's the other way around and they've got the numbers to back it up. (It seems to have more to do with longstanding resentment of McCain among defense contractors than with enthusiasm for his opponent.)

Smoke-filled room

Tue, 21 Oct 2008 14:30:00 -0700

Maybe all this fussin' and frettin' (some of it from yours truly) about casino smoking bans is masking the real issue: Casino expansion in the U.S. has finally hit the wall in the form of one big-ass recession. Five states are contemplating adding casinos this November and in all but one (Maine), it's expected to pass. If so, it'll take some brave souls to buck the headwinds that are pushing casino revenues down.

Gambling halls in Colorado just had another crummy month, with Central City down 26%, Black Hawk off 20% and Cripple Creek declining a "mere" 10%. Some of that is undoubtedly smoking-ban-related falloff, but the smoking issue is beclouding one's ability to see just how much of the decline is a recessionary side effect.

It's no easier to get a clear picture in Mississippi. There, you can still smoke 'em if you've got 'em, but casino revenues are also on the downward slope. The view here is fogged by Hurricane Gustav, which levied a double-digit whammy on the Biloxi-Gulfport market. But Biloxi Mayor A.J. Holloway -- who's been through good times and bad -- isn't going for the easy explanation. He tells the Clarion Ledger, "the real story here is the economy. It’s catching up on us. This is something I kind of anticipated. Las Vegas and Atlantic City have been seeing this for months, so it was just a matter of time before it reached us.” As a consequence, state and local officials are starting to talk in terms of diminished expectations.

As for Louisiana (-23%), it got thwacked twice over, thanks to both Gustav and his bro, Hurricane Ike. Ergo, the entire month's numbers have to be tossed out as an aberration, even the relatively modest 9% decline in Shreveport-Bossier City. ("Relatively modest" only if your yardstick is the -34% declivity suffered by Lake Charles' riverboats.)

Too bad for Pinnacle Entertainment, though: Its L'Auberge du Lac was starting to give Harrah's New Orleans tough competition for the #1 revenue-earning spot in the Pelican State -- only $1 million behind Harrah's in July.

Two of the four lowest-earning properties in the state were Tropicana Entertainment riverboats. CEO Scott Butera's got his work cut out for him. At least Butera's finally driven a stake through the heart of that 10,000-room grotesquerie that predecessor William J. Yung III proposed to build on the site of the Las Vegas Tropicana. Trop Ent needs to maximize what it's got, not chase after pipe dreams.

Pinnacle: "We're the boss here!"

Fri, 26 Sep 2008 13:46:00 -0700

"Pinnacle tells store owner to lower his price" reads the headline in the Press of Atlantic City, and it's no exaggeration. Although the owner of the Atlantic City News Agency (a bookstore) has dropped the asking price for his property by 29%, that's just not good enough for Pinnacle Entertainment, which balks at paying more than $2.3 million. The store's owner wants $3.9 million.

"I think we have to be more realistic on price. They have a written offer. That's the way it is," huffed Pinnacle's viceroy for Atlantic City, Kim Townsend. Yup, Massa Pinnacle's giving the orders here and those pesky locals better fall in line, pronto. Although Pinnacle CEO Dan Lee has slammed the News Agency as "tawdry" because it sells adult magazines, the real tawdriness is Pinnacle's attempt to dictate market values and its picking a fight over $1.6 million in the larger context of a project on which it will spend at least $1.5 billion.

Pinnacle execs would undoubtedly reply that they're simply being fiscally responsible, and I'm sympathetic to that. But projects like Pinnacle's Atlantic City megaresort tend to be advanced with the argument that they will improve property values. Well, property values have improved -- and Pinnacle should have expected this scenario when it pushed past the boundaries of the old Sands site.

Strong language: Never have I seen a journalist who regularly covers the casino industry unload on it in the terms employed by Jeff Haney in a recent excoriation of a Boyd Gaming parlay-card promotion. While the latter's "best parlay cards on the planet" verbiage is obvious hyperbole, Haney ran the numbers and found Boyd's cards not even to be remotely the best in downtown Vegas. Haney called the claim "a blatant lie that goes beyond the usual bluster and hype and reflects poorly on legal gambling in Nevada" and "an out-and-out falsehood."

He said it was even worse than the "sleazy and demeaning to customers and visitors" promos that audaciously touted 6-5 blackjack as a "whopping" advantage. (To the casino, maybe. To the player ... not so much. You should hear the suppressed anger in former dealer Dennis Conrad's voice when 6-5 blackjack is the topic.)

Haney also opened a can of verbal whup-ass on "the bizarro realm of corporate doublespeak, where gambling is 'gaming,' the Super Bowl is the 'professional football championship contest,' and rank suckers (such as those who think Boyd has the best parlay cards) are 'valued guests.'"

His thesis boils down to a central paragraph that reads as follows: "Touting parlay cards as the best on the planet while offering average or below-average odds serves to lower the discourse on the business of state-regulated legal gambling toward the level of a big con."

Players have few advocates more outspoken than Jeff Haney. Bettors are fortunate to have such one-man truth squads on their side.

Kansas, Round 2: It's Cordish!

Fri, 19 Sep 2008 14:59:00 -0700

OK, I was wrong. Incredibly wrong. As you'll hear on the next Vegas Gang podcast, I stuck by my prediction that Kansas' largest casino contract, the one for the greater Kansas City area, would go to Mohegan Sun. Why? Biggest budget, most amenities, a track record of large-scale casino development. At least I covered my butt by saying that Cordish Cos.' piggybacking of their proposed casino onto the Kansas Speedway gave them "dark horse" status. Also, franchising the casino under the Hard Rock brand was not to be gainsaid.

A racino of a different stripe

So when the winner was announced today, Cordish was it. While Mohegan Sun was willing to put a bigger investment ($740 million vs. Cordish's $680 million) on the table, Cordish's synergy with the Speedway appears to have done the trick. They'll whip up a temporary casino (2K slots, 75 tables) sometime next year, to get the cash flowing while the full-scale project rolls toward a 2011 debut.

Here's the real shocker: Mohegan Sun got zero votes, primarily because state consultants projected its revenues as the lowest of the three proposals remaining on the table. (Pinnacle Entertainment and Las Vegas Sands has already withdrawn from the fray. With a major project underway outside St. Louis, plus others in holding patterns in Atlantic City and Baton Rouge, Pinnacle's chances seemed remote. It's difficult to imagine Kansas being willing to take a place at the back of that queue.)

Which means that three of the seven votes went to -- surprise! -- Golden Gaming, a company whose chances I will freely admit to having severely undersold. It says a lot for CEO Blake Sartini's reputation and for Golden's presentation that it came within an ace of winning, despite having a relatively modest track record -- at least nothing remotely approaching the $662 million casino it proposed to build. With Penn National having sulked its way clear out of Cherokee County and the Kansas lottery board starting to display skepticism toward the Ford County bidders, Golden has at least one, maybe two more opportunities it could pursue in the Sunflower State.

Ten months ago, at the time its casino empire was starting to collapse, Columbia Sussex announced that it had sold the Horizon Vicksburg to casino investor Nevada Gold for $35 million. Seems now that it's yet another William J. Yung III transaction that's (pardon the pun) gone south, following the cancellation of the sale of Casino Aztar to Eldorado Resorts.

Juding from the language that ColSux successor Tropicana Entertainment "have been in discussions regarding a possible alternative transaction" without avail, it appears as though new CEO Scott Butera wants to hang onto the riverboat property (whose on-shore facilities are leased, not owned, by the way -- a common ColSux practice). "(N)o alternatives exist that are suitable to both parties" sounds like a nice way of saying that if any other TropEnt properties were worth having, then they weren't on the table. Then again, given Nevada Gold's current financial situation, it might have been the one getting cold feet, but the formal language doesn't encourage that interpretation.

Either way, Butera's been making some expansionist noises of late and pining for the return of the Atlantic City Tropicana. While Butera has operational experience in that market, from his days at Trump Entertainment Resorts, it's exceedingly difficult to imagine New Jersey regulators letting TropEnt back onto the property so long as Yung has one thin dime of equity in the company.

More Trop tomfoolery

Tue, 16 Sep 2008 13:12:00 -0700

Justice Gary Stein's trusteeship of the Atlantic City Tropicana continues its slide toward disaster. The UAW has filed a charge with the National Labor Relations Board, accusing Stein of a lack of good-faith bargaining. Stein has said in the past that he's reluctant to bind a new buyer to the terms of a contract negotiated by a third party.

That was a viable argument back when it looked as though Stein could get the Trop sold by Spring or early Summer. Then he sniffily deemed the offers on the table not good enough (talk about failing to bargain in good faith!) and reset the whole process to "zero."

Given Stein's miserable, foot-dragging performance, it could be months more before long-suffering Trop employees have a new owner, in which case it's unconscionable to continue to allow this situation to fester. Heck, considering the speed with which Scott Butera was able to bring peace to the Las Vegas Tropicana, maybe letting him have the A.C. Trop back wouldn't be such a bad idea, after all. (Not that it's going to happen as long as sole shareholder William J. Yung III has so much as one thin dime of equity in Tropicana Entertainment.)

While restored Trop President Pam Popielarski has shored up the A.C. Trop's financial performance, some of the UAW's charges, if true, suggest she's working off the Columbia Sussex playbook: "denial of Family and Medical Leave Act benefits for dealers, changes to the casino floor, and unilaterally changing the attendance point system and start times for workers."

President Closed ... Again. For the third time this year, Pinnacle Entertainment's President riverboat has pulled up its gangway on account of flooding. Which means that the President will have lost at least 47 business days (and counting), depleting what is already a pretty attenuated revenue base. Given the President's fairly negligible contribution to the St. Louis casino market, perhaps Pinnacle should mothball the old gal. Having grown up near St. Louis, I can well remember the President in her glory days, resplendent upon the St. Louis riverfront. It's sad to see her come down in the world like this.

Note: In honor of Scott Butera's fresh start at the LV Trop and his efforts to put the 'ColSux' era behind him, I've started a new "Tropicana Entertainment" category, as a gesture of faith.

Rapid response; Riviera automates

Mon, 08 Sep 2008 14:14:00 -0700

That was quick. Scarcely had a posted a query regarding the difficulty of finding an out-of-town newspaper in Las Vegas than back came the following response:

"Tell the good folks that you can buy newspapers from the stand out front of Egg And I. We found it a year ago and eat all our breakfasts there whenever we fly into Vegas. If they don't know about this small locals restaurant, they are missing a real treat."

On the subject of eggs, Liz Benston gets a rare, behind-the-scenes look at how the Riviera is making ends meet. Solutions run the gamut from mechanizing the check-in process and centralizing F&B purchases to requiring execs to make do with fewer techno toys. Some moves were unsurprising (layoffs) while others were counterintuitive (reducing the number of slots) but effective.

But the one really off-putting economy is the Riviera's new reliance on Quick Cuisine, a staple of the military mess hall, in its first-ever deployment along the Vegas Strip. Unlike the Bass-o-Matic, it doesn't slice or dice, but the Quick Cuisine "can create and dispense sauces of varying thicknesses and serving sizes, including gravy for a turkey sandwich, spicy tomato sauce for a platter of spaghetti and industrial-sized servings of eggs and oatmeal. Using a process similar to freeze-drying, the manufacturer reduces homemade foods to powders that are reconstituted when they’re mixed with water heated to more than 200 degrees."

Powdered eggs? Blech! Whatever things I'm doing at the Riviera in the future, eating there won't be among them.

Casino Jack strikes again. Yet another Washington lobbyist discovers that his association with Jack Abramoff has toxic consequences.

Dave Schwartz elaborates on his denunciation of Pinnacle Entertainment (see "Comments"). The -- pardon the pun -- money quote is: "The way I see it, this guy is paying his taxes and providing some kind of economic life for the city. More importantly, it’s his store. The wonderful thing about America is that if he doesn’t want to sell it, he doesn’t have to."

Amen to that.

Speaking of Pinnacle, its Atlantic City project is on hold for at least one more year. But if they company has already sunk $400 million into the former Atlantic City Sands site, I'm thinking it's a better-than-50/50 shot they'll move forward on the project. If the city council was amenable to selling Bader Field (which could hold as many as five casinos) starting at $800 million, expecting to garner half that amount by flipping one casino site would seem awfully optimistic.

Pinnacle bigfoots John Q. Public

Fri, 05 Sep 2008 15:22:00 -0700

While I might be somewhere to the left of Dennis Kucinich, I'm not at all comfortable with the concept of eminent domain, even for public-works projects. Now Pinnacle Entertainment is making headlines as far away as Biloxi with its bludgeoning effort to expand its Boardwalk foothold deep into Atlantic City. David G. Schwartz, over at UNLV, has some powerful thoughts on the subject.

(Shades of the Wallace Barr/Curtis Bashaw attempt to push out a mosque to make room for gambling. What better way to stir up opposition? At least nobody's tried to eminent-domain the Muslims out yet.)

Pinnacle, for its part, complains that one landowner wanted $30 million for property valued at $16 million. Oh, the effrontery! Damn those free-market principles! (When they don't work in your favor, that is.) Tax assessments aside, land has only one value: what you can get for it on the open market.

Which is why Phil Ruffin was able to command just shy of $43 million an acre for the New Frontier and why Oscar Nuñez apparently couldn't get Harrah's Entertainment to meet his terms for some sad-sack apartment blocks: Elad Properties wanted to get onto the Strip badly enough to meet Ruffin's price, while Harrah's obviously decided it wasn't worth it would cost to buy Nuñez out rather than just build around him.

Is Pinnacle willing to accept price caps on its hotel rooms or a windfall-profits tax? Do elephants fly? In so many words, it wants property owners to accept profit constraints it wouldn't tolerate being imposed upon itself. Pinnacle's got a right to make whatever it can at its megaresort-to-be. But so do the businessmen it intends to displace.

Blast from the past. Way back on April 30, 2007, I wrote the following, complete with mortifying typo: "Are capital markets tighening [sic] up?" This was prompted by James Packer's and MGM Mirage's ability to buy into Fontainebleau and M Resort, respectively, for relatively little money down. Gee, I feel all Nostradamus-like and stuff.

You can't believe everything you read in the newspaper, I guess. Mike Weatherford has Donny & Marie Osmond at the Flamingo for a one-year gig (starting Sept. 9), while Norm! says it's a six-month deal (sixth item, aptly enough). Two hundred and sixty five shows at six shows a week? Sounds like a one-year run to me.

Anyway, while I don't "get" the Donny & Marie vibe, I'm perplexed by the whiff of skepticism surrounding their forthcoming show. If it isn't a money-spinner for all concerned, I'll be very, very surprised indeed. And if you haven't seen the colossal head shots of the twosome which now blanket the Flamingo's façade, you're really missing something. I just worry that if Marie's teeth were to break off and fall to the sidewalk below, somebody will be on the radio, exclaiming "Oh, the humanity!"

"A bizarre situation"

Wed, 03 Sep 2008 16:55:00 -0700

That's how a CNBC anchor describes the boats-in-moats regime that's prevalent throughout the Midwest and Mid-South, and I couldn't put it better myself. I believe the word "hypocrisy" was also deployed, and that's right on point, too. (Analyst Robert LaFleur also has some thoughts regarding Macao, in the online video, that are worth hearing.)

One of the few things that was well and truly put right in the aftermath of Hurricane Katrina was the relocation of most of the Mississippi Gulf Coast's 11 casinos. It cost Gov. Haley Barbour (R) some political capital and stirred up the ire of the churchy set, but he pushed it through the Lege, and for that he earns at least this vote of thanks.

True, Hurricane Gustav struck a relatively glancing blow at Biloxi-Gulfport -- and when we're talking hurricanes, that's a mighty big "relatively." So we didn't have to find out how the newly land-based casinos would have withstood the brunt of hurricane, thanks be. Still, the fact that what damage was inflicted was but a minor impediment to reopening is vindication of Barbour's initiative.

The perfect is forever the enemy of the good, and Mississippi's casinos still bob in rivers and sit atop pilings in man-made lagoons. Which is damned silly and ought to have been addressed post-Katrina. But I fear the Mississippi solons could only be moved so far and it will take another natural catastrophe or two before the lightbulb comes on.

Same in Lousiana, where neither current governor Bobby Jindal (R) nor his ineffectual predecessor, Kathleen Blanco (D), has shown the gumption to get the state's casinos off the water and onto dry land. In Jindal's case, he's been too busy trying squelch casino expansion instead.

A good thing Gustav wasn't a stronger hurricane, seeing as the Lake Charles market lay in its path. Pinnacle Entertainment gets 80% of its cash flow from Louisana and Isle of Capri Casinos draws 15%, and most of that comes from Lake Charles. Which means that, had this been another Katrina, it could have taken out both Pinnacle and financially ailing Isle of Capri in one fell swoop. If Louisiana's solons are going to continue to predicate their budgeting on casino $$$, or if they see themselves as pro-business or if they just want to preserve jobs, they need to stop shooting dice with Mother Nature and hoping their luck doesn't run out.

Props to Harrah's Entertainment for closing its New Orleans casino on mid-Saturday, exercising the discretion that is the better part of valor. Harrah's also shuttered its Biloxi casino early Sunday morning (4 a.m. to be precise), three hours before the edict came down from the capitol. Others were not so proactive.

First as tragedy, then as farce. It just wouldn't be a cataclysmic weather event without some predictable buffoonery from New Orleans Mayor Ray Nagin, the single most ridiculous figure in the Katrina debacle (beating out some tough competition).

Simply put, Nagin freaked out. (Again.) "This is the mother of all storms. I am not sure we have seen anything like it ... This is worse than Katrina," he overreacted. Then, reverting to Nagin-esque every-man-for-himself form, he proclaimed, "If you decide to stay you are on your own."

Yup, when it comes to abdicating responsibility in the face of a crisis, there's nobody quite like Ray Nagin. (Maybe he'd been listening to the meteorologist Bloomberg News quotes as predicting widespread failure for the Crescent City's levees and having a meltdown of his own.) I kept tabs on Gustav via that normal hotbed of hysteria, cable news, and heard no Nagin-like levels of panic, least of all from the Weather Channel.

And it sure looks as though every responsible agency and public figure performed with both competence and continence. Except Ray Nagin. As usual. Then again, New Orleans voters re-elected this bungler right after Katrina, so they've not much room for complaint.

On the other hand ...

Mon, 25 Aug 2008 18:01:00 -0700

... if Illinois casinos are sucking wind (which they are), why hasn't this redounded more to the benefit of neighboring states? For instance, it looks like Indiana had a good July, but once you back out two new racinos, a 2% gain turns into an -11% retreat from last year's numbers.

And the northern Indiana boats ought to be doing better, even if Horseshoe Hammond's revenues (-18%) were depressed by a temporary closure and Boyd Gaming's beleagured Blue Chip (-40%) is a drag anchor on the regional average. Still, a -15.5% year/year comparison -- even with those two factors taken into consideration -- doesn't suggest floods of nicotene-deprived gamblers storming the gangways.

Only Majestic Star, of all unlikely vessels, had a revenue-positive July. Year to date, Ameristar Casinos is doing the best of any single company, which makes its recent decision to run up the white flag and sack 244 employees, fretful over a newly expanded Horseshoe Hammond, look doubly defeatist. Current Ameristar management just doesn't look like they're in it for the long haul (read "not cut out for it" or "lack the stomach for it").

A change of brand, to Horseshoe, isn't doing the trick -- yet -- for Harrah's Entertainment's Glory of Rome. The glamorously named Horseshoe Southern Indiana (formerly Caesars Indiana) is the only casino in the Hoosier State's southern reaches to post negative revenue comparisons for every month of 2008. The others either swing like weathervanes or, in the case of Casino Aztar, improved dramatically with a change in management.

If French Lick isn't licked, it appears to have crested. The turnaround at Casino Aztar (currently under state trusteeship) blunted its revenue growth, as did the debut of the Indiana Live and Hoosier Park racinos. Until the economy improves, it looks like it's maxed-out at $8.5 million-$9 million per month.

Missouri is another puzzle, down 3% once the effects of Pinnacle Entertainment's nascent Lumiere Place are subtracted. The St. Louis market, closest to Illinois, was -8%, while Kansas City -- the market with the least to gain from Illinois' troubles -- was up 2%. Go figure.

All companies except Harrah's had a revenue-positive July, even Isle of Capri Casinos. Harrah's lost market share in St. Louis and Kansas City, and Ameristar gained in both markets. (See previous comments about unwarrantedly panicky Ameristar execs.)

And see them again once we note that Ameristar had the best July of any publicly traded company in Iowa, +3%. (Harrah's and Penn were flat, Isle down almost 6%.) Ameristar had the third-highest performing casino in the market, trailing Harrah's Horseshoe-branded racino and the Prairie Meadows track. A good month at the tracks offset a flat one on the riverboat, making Iowa revenue-positive for the month.

This was the first full month of year-over-year comparisons for Isle's newest casino, in Waterloo, which was down over 13%. Wow. The bloom went off that rose fast. The previous Isle regime's business model of growing revenues by opening more and more casinos is well and truly out of gas.

Isle's Bettendorf casino, however, was the only one of the company's quartet of Hawkeye State riverboats to increase revenue in July. Could it be ... the Illinois smoking ban coming into play? I'm going to opt for Occam's Razor and say, "Yes."

Trop sale stumbles forward ... sorta

Mon, 18 Aug 2008 12:42:00 -0700

If Justice Gary Stein, the state-appointed trustee for the Atlantic City Tropicana Casino & Resort, isn't the most inept public servant in America, it's not for lack of effort. Add nepotism to his string of failings, as his ever-less-credible pronouncements now emerge from the mouth of his son, Martin Stein, a lawyer who has apparently joined Dear Old Dad at the public trough.

The Steins' latest bit of boobery involves not re-starting the bidding process for the Trop until sometime (as yet unspecified) after Labor Day and then having it wrapped up on Oct. 16, six weeks later. Their excuse for this foreshortened timetable is that advisers Moelis & Co. are "just beginning their work," even though they've been on the payroll for over a month and a half. I'm not necessarily saying the Stein-supervised process is slow, but I've seen glaciers that moved faster.

The Steins also continue to evince boundless optimism that they're going to get better offers the second time through the process. Considering that Atlantic City's revenue numbers have continued to weaken and the economy has not improved, I'd sure like a sniff of whatever "happy dust" they've been inhaling. Of course, the blame ultimately redounds to the New Jersey Casino Control Commission for appointing Justice Stein to perform a task for which he has proven, by all outward appearances, manifestly ill-equipped.

On other Trop-related fronts, the prospect that Tropicana Entertainment may renege on its sale of Casino Aztar is stirring up alarm in Evansville, Ind. As revenues predictably plummeted under the slash-and-burn regime of Columbia Sussex (TropEnt's parent), so did Evansville's revenue share: -27% the first year, with incremental decreases projected through 2009.

There's no guarantee Eldorado Resorts will reverse the slide, but this may be one case where the devil you don't know is distinctly preferable to the one you do. ColSux is playing with fire, too, because a nixed sale could (and probably would) re-start Indiana's investigation into its operation of Casino Aztar, an investigation that was forestalled only by the Eldorado deal.

Would you buy a used casino from this man?

What do you call a casino exec who loses $1 billion in a single year? Columbia Sussex CEO William J. Yung III, that's what. (Also "sucker".) Yung's also suffered the public indignity of having himself and his properties dissed by rival CEOs Gary Loveman, Penn National's Peter Carlino and Pinnacle Entertainment's Dan Lee, not to mention the private one of having other Atlantic City casino operators quietly encourage Unite-HERE in its get-Yung-out-of-town campaign. Clearly, the man had a facility for making enemies in the industry.

In today's Las Vegas Sun, Liz Benston takes a look back at Yung's Aztar Corp. acquisition, a deal so expensive and so elaborately collateralized (not to mention one that put a walloping financial burden on a grab-bag of second- and third-tier casinos) it was all but predestined to fail. Unfortunately, Benston buys into some of Tropicana President Scott Butera's revisionist history, particularly his fish story to the effect that: "When the economic decline began to hurt earnings, Yung was forced to make cuts that eventually proved counterproductive."

That's a face-saving spin Butera has been shopping around since he took the Trop job but the fact is Yung's Aztar purchase was in some respects predicated on making those cuts. They were part of his "road show" presentation to would-be financiers (despite representations to the contrary to New Jersey regulators) and he even hinted broadly at what was coming in a Casino Enterprise Management interview where he talked about making hotel maids do double-duty on the casino floor. The ColSux supremo had to promise savage payroll and personnel reductions if he was to persuade investors he could make this turkey fly -- and now he's got a slew of age-discrimination suits to show for it.

And let's not forget that while Yung no longer has a title or a board seat at Tropicana Entertainment, he's its sole shareholder, the power behind Butera's throne. Until this spectacularly maladroit casino operator liquidates the last of his TropEnt shares, presumably in a debt-for-equity swap, his bad karma will continue to dog the Tropicana and Aztar brands.

Casino CEO disses own games. "They're boring." Yes, that's really what Trump Entertainment Resorts CEO Mark Juliano said about the very sort of electronic table games he installed at Trump Plaza. Combine this with the imminent demise of live dealers at Excalibur's poker room and you've got the beginnings of a trend in the major resorts that appears both inevitable and discouraging.

Sophistry in Kansas

Mon, 18 Aug 2008 11:14:00 -0700

JP Morgan analyst Joseph Greff, gleaning the wire services, reports that Pinnacle Entertainment has stubbed its toe by including endorsements from three Wyandotte County/Kansas City officials in its presentation to the Kansas Lottery Gaming Facility Review Board (whew!). Echoing state law, Pinnacle says the trio were acting not as elected officials but as private citizens.

Which would be like saying that George W. Bush gave his endorsement of Sen. John McCain in his capacity as a Texas-registered voter and not as President of the United States (and pay no attention to that White House in the background, please). In other words, it's a distinction without a difference -- and a silly law to boot, but I can't blame Pinnacle for exploiting the Sherman tank-sized loophole it opened.

Update: Upon further review ... it turns out that the three commissioners were identified as such when delivering their video pitch for Pinnacle. Which, from any common-sense standpoint, means they were acting in their official capacity and Pinnacle, after kicking the ball onto the fairway, is now trying to have it both ways. A finer case of hair-splitting I've not seen since Bill Clinton parsed the meaning of the word "is."

Harrah's: Cheap? Desperate? Of course the two options are not mutually exclusive (and don't forget that Harrah's Entertainment and its two LBO partners, according to the Wall Street Journal, appear to have written off 20% of their $3 billion equity contribution to the company's buyout). Whichever option you choose, this Las Vegas Review-Journal story speaks for itself.

What's particularly ominous for slot-makers is analysts' conclusion that this is a sort of shakedown whereby Harrah's pressures IGT for a bigger proportion of their shared slot revenue -- and that, if it succeeds, it could lead to tacit collusion up and down the Strip to wrest concessions from the slot companies.

It's worth remembering that, nine years ago, casino bigwigs were pressuring the Nevada Lege to outlaw revenue-sharing games altogether. It was a blatantly unconstitutional restraint of trade and eventually died the death it deserved ... but it had considerable juice behind at the outset. Which goes to show that history repeats itself: but in this case, first as farce and only later as tragedy.

Don't tax me, bro!

Wed, 06 Aug 2008 18:19:00 -0700

Guess who's kvetching about his property tax bill? Why it's our old buddy, Columbia Sussex CEO William J. Yung III -- or at least his surrogates at Horizon Vicksburg. It's been the better part of a year since Yung announced the sale of this riverboat to Nevada Gold, yet the deal still hasn't closed. (Too bad, because the promise of that $35 million was being used to palliate angry debtholders last winter.)

Even though Olympia Gaming and Las Vegas Sands have bailed out of their respective pursuits of casino ownership in Kansas' Wyandotte County, two Vegas-based companies are still in the running. Pinnacle Entertainment has a lot of irons in the fire already and its wait-and-see attitude toward Atlantic City development may not be what the Kansas Lottery Gaming Facilities Review Board (now there's a mouthful!) wants to hear. Golden Gaming's experience, a brief stint at the Vegas Hard Rock Hotel & Casino aside, is of the small-scale variety, which may also provoke skepticism.

While tribal powerhouse Mohegan Sun is hurting on the Uncasville homefront lately, it's coming off a solid performance in Pennsylvania. I like its chances. Cordish Cos., whose pursuit of the Atlantic City Tropicana was recently rebuffed (for no good reason), is obviously itching to get into the casino industry in a big way. Perhaps its proven track record as a developer will outweigh its inexperience in the casinosphere.

Ameristar: What makes sense?

Fri, 01 Aug 2008 14:45:00 -0700

Perhaps this is what happens when you outsource your business coverage to India, but Reuters had a story yesterday positing MGM Mirage and Harrah's Entertainment as two of the likeliest buyers for Ameristar Casinos.

Uhhh, I hate to break this to Reuters, but MGM just came up $3 billion and change short on CityCenter and Harrah's is debt-strapped. So I'd say they've got their hands full. How either one would be able to swing an Ameristar acquisition is an open question. Harrah's also faces redundancy issues, as it already owns riverboats in three of Ameristar's key markets -- Council Bluffs, Iowa, and St. Charles and Kansas City, Mo. Why MGM would feel a sudden hankering for Black Hawk, Colo., plus a brace of casinos in Jackpot, Nev., is even more of a poser.

Reuters' third suggestion, Boyd Gaming, seems a lot closer to the mark. With Echelon temporarily in the deep freeze and Boyd's Blue Chip riverboat leaking market share, a passel of regional casinos in markets where Boyd doesn't currently operate could provide welcome cash flow, shore up the company against its current non-presence on the Strip, and expand the web of properties from which Boyd could funnel players into its downtown Vegas cluster or (eventually) Echelon. Of course, Boyd may still be smarting from a failed Kansas City venture a decade ago, but Ameristar's assets are proven performers.

Besides, it's a company that could use some helmsmanship, having seemed to drift since the demise of CEO Craig H. Neilsen. Although paralyzed from the neck down and often bed-bound (which I've heard resulted in some very unconventional corporate meetings), Neilsen achieved more from the neck up than most able-bodied people do in their entire lifetimes. His successor, ex-Harrah's exec John Boushy, tried to sell the Ameristar people on a change of corporate culture but they didn't want to hear about it. So, given an evident leadership vacuum, a change of ownership makes sense.

Unless Penn National wants to take its $1 billion-plus in "mad money" and go after Ameristar, there aren't too other many potential acquirers abroad in the land. James Packer has already sworn off. Pinnacle Entertainment would rather build than buy. Tribal giant Mohegan Sun has been flexing its financial muscle of late and rates as a longshot candidate (but just came off a wretched second quarter). Beyond that ... who knows?

The Ameristar war begins

Thu, 17 Jul 2008 18:49:00 -0700

Just a quick hit on my way out the door to spend an evening prepping for The Dark Knight by watching Batman Begins ...

Ameristar's in play. No news flash there and, for the life of me, I can't figure out why the Motley Fool thinks MGM Mirage will be the ultimate acquirer. The company doesn't seem particularly interested in regional markets these days and has been pulling back from some of them -- the same outstate-Nevada kinds in which Ameristar currently operates.

On the other hand, as the article points out Crown Ltd. has $5 billion burning a hole in its pocket after the Las Vegas Tower deal went limp. I don't know offhand what the seven-times-cash flow number for Ameristar is, but $5 billion should cover it with room to spare. The Fool lays out a compelling case for how Crown could use Ameristar's properties to funnel customers to Fontainebleau -- much as Harrah's Entertainment did with The Rio, back in the Phil Satre era.

Then again, there's Penn National, which has about $500 million in mad money (after stock buybacks) right now, thanks to the breakup fee from its busted IPO. With another $775 million promised to Penn, it ought to be able to ante up the acquisition fee without breaking a sweat. Ameristar's Missouri properties have been money-spinners and, as the Fool points out, the acquisition of the Ameristar brand would enhance Penn's persistent second-tier image. A combined Penn-Ameristar would give Pinnacle Entertainment a run for its money in St. Louis, and could regain ground being lost to MGM and Harrah's in the greater Chicago market.

Whoever loses needn't feel too bad. The Atlantic City Tropicana is still out there and debtors will probably force a sale of the rag-tag remnants of Columbia Sussex's casino 'empire.' With its market cap languishing around $837 million, Boyd Gaming looks vulnerable and if you're in a thrift-store mood, Isle of Capri's fallen to near-micro-cap status, at $157 million. Then again, you have to figure out how to turn around 'Pile of Debris.' So maybe it's not such a bargain after all.

Indiana: It sure could be worse

Tue, 08 Jul 2008 21:00:00 -0700

... because you could be Illinois, where June gambling revenues went into the toilet (-21%). Which isn't to say that Indiana's numbers look good only by comparison. In fact, the Hoosier State may be benefiting from the Land of Lincoln's misery. It's sort of a "Yes, but ..." situation.

Yes, Indiana would be a lot worse off (-12%) without two new racinos, Hoosier Park and Indiana Live. Their addition has kept gambling revenues virtually flat from June '07. And that's two flat months (as in variance of less than 1%) after eight months of declines. In terms of gross, Hoosier Park vaulted into the #5 spot, while Indiana Live checked in at #9.

Yes, northern Indiana initially looks like it got clobbered (-11.5%). But once you back out Boyd Gaming's Blue Chip riverboat -- which is something of a special case -- the picture improves considerably. All northern riverboats except Resort International's are down, but not on average as much as the southern Indiana riverboats.

All of which suggests that gamblers fleeing Illinois' new smoking ban are taking refuge aboard the northwest Indiana boats. Blue Chip, which is the closest one to the tribal Four Winds Casino Resort, across the Michigan state line, is really taking it on the chin: -39.7% in June. Boyd's struggles here -- and with its Florida parimutuel (which isn't even shown on the company's official Web site) -- make it tempting to call for retrenchment. But, in the case of Blue Chip, it's on pace for $190 million in revenue, which is scarcely chump change ... good enough for the #6 spot in statewide gross.

Dollarwise, Harrah's Entertainment's Horseshoe Hammond now enjoys the top spot, once the exclusive preserve of Penn National's Argosy Lawrenceburg. The latter, however, still has bragging rights to the largest slice of market share (just under 12%, according to the Indiana Gaming Commission) in the state.

Amongst the southern Indiana casinos, only Pinnacle Entertainment's Belterra enjoyed [sic] a single-digit decline in June, while almost everyone else suffered double-digit slumps.

The lone gainer was -- surprise! -- Columbia Sussex's Casino Aztar, up 2.5%. A recent, regulator-placating, promotion-friendly change of administration at Casino Aztar may be the X factor here, as the riverboat followed January-April declines with two months of gains ... the only casino in the state to post that pattern. (Resorts Int'l must really be onto something, what with five straight months of growth in the teeth of an adverse economy.)

Casino Aztar's gain appears to have been French Lick Casino's loss. The lowest-grossing casino in the state, its novelty factor may have worn off, as it's down by almost 25% in June. Then again, French Lick's numbers have been all over the place this year, so who knows? However, it was perceived as the primary competitive threat to Casino Aztar, a challenge that may now have been blunted. We'll see.

And can anybody tell me why two adjacent casino boats, owned by the same company (Don Barden's Majestic Star and Majestic Star II) can have such disparate results? One is off by 4% while the other is down 13%. Then again, who can explain anything Barden-related these days?

"Raking" it in at Trump

Fri, 27 Jun 2008 12:25:00 -0700

Once I'd read that Trump Plaza had gone to automated no-dealer poker, my first thought was, "What becomes of the 'rake'?" Not to worry: The machines have taken care of it. Or, as Casino Manager Anthony Spagno was kind enough to explain, "As the case with a dealer, the rake is deducted from the pot at certain intervals during each hand with a maximum of $3.00. Time raked games are deducted from the players table stakes according to the rake schedule."

Automated poker is catching on at Trump Plaza in part, I suspect, because there was no poker there previously and because, according to the article, it provides a user-friendly 'bunny slope' upon which to get acclimated to the game.

These Poker Tek tables have yet to be approved in Nevada, where I'm sure they'll produce an interesting schism. Obviously, no self-respecting poker room on the Strip would install them, but they'd probably do well out on the floor amongst the casual players, even more so than Rapid Roulette, for instance.

And I can definitely see PokerPro muscling into the low-budget Vegas casinos and maybe even some mid-market ones. For instance, you could plunk them down in the poker "room" at Suncoast (really just a random corner of the casino floor) and I doubt anyone would notice the difference.

June's Bad Service Award goes to the bartender at the Sahara's NASCAR Cafe. I killed time there with a soda while some friends and family went roller-coaster-riding. The bartender was surly, took forever (on a very slow Saturday night) and my $2.95 Coke came in a thimble. No tip for that schmuck.

Why is it that casinos are usually willing to pay higher taxes when virtually every other business is only too eager to shirk its civic responsibility? The latest group of gambling halls to pony up are the East Baton Rouge riverboats. Most generous, at least in theory (because it haven't built its riverboat yet) is Pinnacle Entertainment, offering 4.5% of revenues outright, according to JP Morgan.

More complicated formulas apply to the two extant vessels. Columbia Sussex's Belle of Baton Rouge will pay 2% if revenues are less than $73.6 million, but -- if that benchmark is achieved -- it pays a split rate of 3.5% on the first $73.6 million and an extra percent on anything more. Penn National's Hollywood Casino Baton Rouge subscribes to an identical formula, save that the magic number for Penn is $100 million, not $73.6 million (which seems to be a nice way of saying that Penn is trouncing Columbia Sussex. What a surprise.)

The new tax rates supplant $2.50/head boarding fees formerly in place in East Baton Rouge Parish.

Hooters sagging

Thu, 03 Apr 2008 13:29:00 -0700

Yes, they're drooping again at the mammary-themed hotel -- revenues, that is. The recession continues to hit the bargain-niche properties first and hardest. The interesting info is buried toward the end, as potential buyer Richard Bosworth (who's already put $3 million down, with $222 million to go) is shelling out another non-refundable half-million to keep its option alive for another month.

This is the same stalling pattern Christopher Milam fell into with the Wet 'n Wild property. If Bosworth is having trouble scaring up the purchase price (and does the Hooters-augmented San Remo look like that tempting of a credit risk?), it doesn't bode well for the promised $130 million redevelopment, either.

On a related note ... You can set your watch by it. The annual, obligatory Passion Parties story. It must be some journalistic hazing ritual.

Fix? In? Not here! Another scofflaw gets off lightly.

An implosion! Woo-hoo! All right, so it's only a casino garage and it's in Atlantic City. But it looks like that Pinnacle Entertainment project is still in "on" mode, Dan Lee's caveats notwithstanding. There's video, too.

Double or Nothing UNLV's David Schwartz reviews the apologia pro vita sua of former Golden Nugget co-owner Tom Breitling. Schwartz finds a great deal to like in the book, and is very generous and sympathetic in his appraisal. I'm not scheduled to weight in on Double or Nothing until the May 5 issue of City Life, but I feel safe in saying that your book dollars are far better invested in Christina Binkley's Winner Takes All. Breitling's book is a quick read, though, partly by dint of leaving out whole chunks of the story -- like a not-so-successful filmmaking venture with the Fertitta brothers, which goes completely unmentioned.

How much interest will there be in Double or Nothing? Hard to say. It's been over three years since he and Tim Poster sold the Nuggets, a timespan far longer than that of their brief ownership, and they never became major players in the industry (as opposed to the pages of Norm!). For a businessman as successful as Breitling, I'm surprised he'd get his product so tardily to market.

And now to end on a (rare, some would say) classy note ...

Honoring a legend. Former Silver Slipper owner Claudine Williams receives a "Philanthropist of the Year" award tonight. Congratulations to the grande dame of the gaming industry. Long may she flourish.

Stalemate at The Orleans; Big Easy has big month

Wed, 19 Mar 2008 15:51:00 -0700

It's been almost nine months since the majority of Boyd Gaming's stagehands voted to unionize. Since then, they've been subjected to a managerial smackdown and their elected representative, IATSE, is virtually powerless to alleviate the situation -- or even to get a contract out of Boyd. IATSE has been similarly impotent with regard to Blue Man Group's stagehands.

Let's face it, for all the anti-labor huffing and puffing in the pages of the Hooterville Times, er, Las Vegas Review-Journal, unions don't have that much clout in this town, with the notable exception of the Culinary ... and even it couldn't do beans for Sen. Barack Obama. Union negotiations on behalf of Wynn Las Vegas dealers have slowed to a crawl and the Culinary's talks with the Las Vegas Tropicana are completely stagnant, as of last report. In at least one of those instances, management gives every appearance of being intent on forcing a strike.

What is most troubling about l'affaire Orleans is the Mark Garrity-led reprisals that are alleged (and Michael Mishak of the Sun is one of the best-sourced lawyers in town). If true, they're a blotch on the reputation of what's generally one of the most dignified of the major casino companies and -- at worst -- could easily run Boyd afoul of the National Labor Relations Board.

We've progressed beyond the era when casino management sicced the goon squad on union meetings -- but not as much as we'd like to think, it would seem.

According to the Daily Comet (love that name!), Lead Day meant a revenue leap for Lousiana casinos, who posted a $24 million increase over February '07. Unlike Las Vegas, New Orleans actually saw some casino benefit from the NBA All-Star game and Harrah's New Orleans (above) notched its second-best month in its entire history. (Does this mean Harrah's Entertainment CEO Gary Loveman will finally stop pouting about not enough tourists gambling at his Big Easy property?)

Columbia Sussex's Amelie Belle, soon to depart after nine months in Morgan, pulled in almost $5 million, while Baton Rouge riverboat revenues crept up only slightly. The #1 riverboat in Louisiana, revenue-wise, was Pinnacle Entertainment's vessel at L'Auberge du Lac, on Lake Charles, raking in $26.5 million.

That Houston-fed market is also home to Boyd's Delta Downs, another strong performer ($15 million). Even the competition-besieged Bossier City market was up, posting a $2.5 increase. In descending order, the top three markets were Bossier City (six casinos, $75.7 million), New Orleans (four casinos, $66.5 million) and Lake Charles (four casinos, $55.8 million), for Y/Y increases of 3%, 18% and 3%, respectively.

A.C. Trop to go begging?

Mon, 17 Mar 2008 12:14:00 -0700

You have to wonder after reading this story, which suggests that -- out of a field of two-dozen potential suitors for the Atlantic City Tropicana -- virtually everyone is heading for the tall grass. Or maybe it's an en masse fake-out and some "surprise" bids will sneak across the transom at 4:59 p.m. EST.

To get a recurring annoyance out of the way, I don't know why reporters keep dragging Harrah's Entertainment into this. With four casinos on the Boardwalk already, Harrah's would undoubtedly stir antitrust concerns if it made a play for the biggest hotel in the market. As for MGM Mirage, does anyone seriously think it's got the the time or the interest in bothering with the Trop when it's got a $5 billion dollar Atlantic City project of its own on the drawing boards?

Mohegan Sun has taken a powder and it looks as though Pinnacle Entertainment (whose Boardwalk megaresort project is currently in abeyance) is doing the same. Colony Capital's Owen Blicksilver is doing his usual "no comment" thing, and most everyone else (Cordish Cos., Ameristar, the Bashaw/Barr duo) is following suit. What's more, The Press of Atlantic City suggests that the Trop's asking price may be in freefall.

True, there's a $950 billion offer on the table from what is aptly described as "a mysterious New York investment group." I'd be be surprised if this particular bid doesn't evaporate upon closer inspection by Bear Sterns, hired to perform due diligence for the State of New Jersey. Plus, the Trop may just be too dilapidated and too damn old to take on right now.

Then again, Columbia Sussex CEO William Yung III might get the courts to enjoin the sale altogether, pending the outcome of his lawsuit against the New Jersey Casino Control Commission. I'm sure the NJCCC's potential can't-sell-the-Trop predicament will cause him no pain, personally. (His bondholders, though, may take a different view, seeing as they're counting on that Trop-sale cash he promised them.)

Photo/PDF snafu corrected

Thu, 06 Mar 2008 11:54:00 -0700

It seems that our two computer servers here at LVA HQ were having a bit of a snit and not communicating with one another. As a consequence, some of you were unable to see a lovely photo of Isle of Capri's Waterloo casino water feature, and renderings of PBL Melco's City of Dreams, Pinnacle Entertainment's St. Louis County project and the Prasada condo-hotel recently announced for Atlantic City. Also, PDFs of two initiative-and-referendum petitions to freeze Las Vegas Convention & Visitors Authority funding at 2006-07 levels were unavailable.

All these links have, I'm happy to report, been fixed. My apologies for any frustration or disappointment that readers may have experienced. We'll try not to let it happen again.

Desperation in Florida

Wed, 05 Mar 2008 17:53:00 -0700

... and for once we're not talking about Sen. Clinton's attempts to seat a rogue slate of delegates.

Is Isle of Capri's racino a disappointment (especially for horsemen)? Is Boyd Gaming taking Florida expansion off the table? Is Magna Entertainment threatening to close overextended Gulfstream Park? What's a Florida lawmaker to do?

Why, legalize every form of gambling short of cricket fighting, of course. Statewide slots, a lottery, regulated "adult arcades," high-stakes poker -- it's all on the table as Sunshine State solons head back to Tallahassee, no doubt looking forward to two months of nonstop eye-poking and head-slapping between Gov. Charlie Crist (R) and archenemy House Speaker Marc Rubio (R), as they tussle over a shrinking state budget.

Rubio's still trying to rein in Crist's Class III compact with the Seminole tribes, but that horse may have long since left the stable. The Seminoles are proceeding as though they'd never heard of Marc Rubio. Should he get a court to overturn the compacts, Florida lawmakers who have had a taste of once-forbidden Seminole gambling lucre may already be hooked and repudiate Rubio (who's a lame duck, anyway).

As for the absence of cricket fighting from the list of proposed fiscal remedies, I'd guess that's just an oversight.

The Schmuck Report: On a humorous note, sports reporter Peter Schmuck takes a glance at the gleaming façades of Florida's racinos and declares that "the experiment with increased gambling in Florida appears to be a success." This is either disingenuous boosterism for bringing racinos to Maryland (an on-again, off-again quest) or else Schmuck is happily inhabiting a parallel universe.

Corzine opines. New Jersey's governor goes on the record as favoring smoke-free casinos. He also backs the Casino Reinvestment Development Authority in its quarrel with Atlantic City over whether or not to sell Bader Field to Penn National. (Turns out Penn wants additional land re-zoned for casinos, too.)

Financing is sufficiently concrete, Corzine says, for both Revel and MGM Grand Atlantic City, and he's bullish on Pinnacle Entertainment's postponed megaresort. And playing the stock market isn't gambling, he says: "We made probability judgments about the viability of assets."

'Terrible' timing

Mon, 03 Mar 2008 19:40:00 -0700

By golly, it seems like a mere nine days ago that a local newspaper story was reporting disproportionately strong lottery sales at a California-border store owned by Herbst Gaming. "Since taking over the store, the location's total lottery ticket sales have been more than $8.9 million," said the newspaper, although Herbst executives refused to take any of the credit that was being foisted upon them. "It's something to which we haven't given much thought," disclaimed one.

Fast-forward six days and it turns out Herbst is "evaluating financial strategic alternatives," with the help of Goldman Sachs. Why? It would seem that Nevada's partial ban on smoking in public places (aka Question 5) has delivered a dagger thrust to Herbst's slot routes, whose performance is off by one-fifth. Which partly answers the question of how slot routes would fare in Question 5's aftermath.

Last week, it also emerged that one of the moves being contemplated is the sale of some or all of Herbst's casino empire, mostly amassed in the last 14 months through the absorption of three castoff MGM Mirage properties in rural Nevada and the Sands Regent brand. That's a debt load that Herbst can ill-afford to carry if its slots routes continue to tank.

Standard & Poor's cut Herbt's credit rating to CCC today, in part because of "continued weak operating performance at the company's riverboat and land-based casinos." Already WHO-TV, in Des Moines, Iowa, is reporting that one casino is openly for sale. It reminds me of another company that grew too fast too soon ...

Columbia Sussex driving out business? A 104-year-old hardware store and a paint store are shutting down and (in the case of the paint store) moving, all to make room for a casino that might be built if the Kentucky state senate and the voters of the Bluegrass State approve a proposal currently before lawmakers. Oh, and if Covington, Ky., is awarded one of the nine licenses and if that license goes to Columbia Sussex. If not, Columbia Sussex owner William Yung III will have himself a $7 million collection of empty buildings, albeit at the mouth of a freeway exit. So it's not totally a spin of the roulette wheel. Just mostly.

And now for some positive thinking. Naysayers who freak at the thought of a 9.75% casino tax rate might want to consider the influx of investment -- albeit somewhat attenuated at the moment -- into Atlantic City, where the tax rate is 9.5%. MGM Mirage isn't wavering from its high-profile commitment and not only is Penn National willing to go all in, it's wagering that it can lure three other casino companies ... provided it gets all of Bader Field as a precondition.

True, Pinnacle Entertainment is hesitating and the Curtis Bashaw/Wallace Barr project seems to have been indefinitely back-burnered. But, in the former instance, icy credit markets are primarily to blame. As for the latter, the Bashaw/Barr duo is presently in the hunt for the Atlantic City Tropicana, which would make a good strategic fit with Bashaw's Chelsea Hotel redevelopment. So it's far too early to pronounce Barr & Bashaw's south-Boardwalk casino-hotel D.O.A. ... unless they land the Trop, in which case a nice little 'flip' awaits them.

Whoever thought Atlantic City would be the Land of Opportunity?

Pinnacle remains sanguine

Mon, 03 Mar 2008 16:46:00 -0700

... despite pulling back somewhat from its commitment to redevelop the site on which once stood the Atlantic City Sands. Does Pinnacle's hesitation regarding the Boardwalk portend ill for riverboat projects in East Baton Rouge or St . Louis County (below)?

"In a word, no," says a Pinnacle representative. The costs of these projects are but a fraction of the Atlantic City one ($250 million for Riviere, in Lousiana) and it's really a matter of returns, the company says. The expected returns on Riviere, for example, would make it worth financing, even in a softening economy. A multi-billion-dollar property in a market that isn't license-limited (read: Atlantic City) is a different story, though.

There's no deadline, Pinnacle maintains, no gun to their heads. Financing doesn't need to be raised until late 2009 or even 2010, by which time the credit markets could still be quite a different story.

Still, hindsight being 20/20, you have to wonder if Pinnacle would have been in such a rush to demolish the Sands had it known last July what it knows now?

And Oswald acted alone, too. Local newspaper finds man who takes sole credit for two ballot initiatives that would cap Las Vegas Convention & Visitors Authority funding at 2006-07 levels (even though they couldn't go into effect until 2011), adjusted for inflation. I guess the fact that these initiatives would accomplish a prime objective of Sheldon Adelson is just a big coinky-dink, after all. Whew! There I was, all worried about nothing.

Same paper, different day. "The sky is falling!" Why? Because most Nevadans, polls show, want to raise the privilege tax on gaming from the lowest to the second-lowest. That ink might have been better spent lobbying for a gross-receipts tax that would spread the (relatively modest) pain across a broad spectrum of businesses. But to decry a 9.75% privilege tax rate as The End of the World As We Know It when companies like Las Vegas Sands are jostling to pay 50% in Kentucky doesn't pass the laugh test.

Quote of the Day: "Lets see? Four guns, deadly poison and books on anarchy. I don't think we have anything to worry about. " -- Keith Hulbert, in the Las Vegas Review-Journal, commenting on Las Vegas Metro's response to last week's ricin scare.

Too.Damn.Funny (and other topics)

Tue, 19 Feb 2008 11:08:00 -0700

If you're already maxed-out with rocker will.i.am's "Yes We Can," then you have to check out this mock Time-Life compilation, "Barack With You." It manages to work in Bill Haley & The Comets, Simon & Garfunkel (the original S&G), The B-52s and LL Cool J. It's good for more than a few laughs to start the day.

Say what you like about the casino industry, it's lifted quite a few people out of poverty, and brought jobs and tourism to formerly blighted areas. Which is a good thing when you consider the toxic effects of poverty and its ability to drag down future generations.

Which is why Las Vegas, New Orleans, Atlantic City, Gary, Biloxi and other casino-fueled metropolises, in addition to good-paying jobs, need good schools to go with them. And why it's again important to note that the votes that pushed Pinnacle Entertainment's Riviere project in East Baton Rouge over the top came from predominantly black precincts, not white-dominated ones. They knew a good thing when they saw it.

Chubby, Huntington Press' unofficial cat-in-residence is going to have to remain an outdoor kitty, sad to report. The beautiful, if rather stout, feral feline took to our researchers like a duck to water. Sadly, she also took an inordinate amount of interest in Mojo, our fierce resident iguana. Chubby kept trying to bust into Mojo's three-story domain and it was a situation that was unlikely to end well for either of them. So if you see Chubby hanging around outside HP HQ, give her some TLC and assure her it was nothing personal, just business.

Moulin Rouge, Sahara, Sands previewed

Mon, 18 Feb 2008 12:42:00 -0700

Vegas Today and Tomorrow has the goodies on a proposed Moulin Rouge redevelopment, the Sands Expo Center 2.0, the Palazzo condo tower, and what's going down (literally and figuratively) at the Sahara. Let's just say if you haven't stayed in the Tunis Tower, you'd better hurry. As for the new Sands Expo, it's going to be hella far from the Venetian and Palazzo towers, which means convention-goers can expect a healthy hike to and fro. Since owner Sheldon Adelson is known to employ a scooter chair from time to time, maybe he should rent them out, too. I'm sure it would turn quite a profit.

Here's a teaser of what's to come (snurched with permission from VegasTodayandTomorrow.com):

Not only do I second site curator Mark Adams' comments on the Sahara, but couldn't they take down that permanent sign that says, "Rooms as low as $49.95"? I mean, it's one thing to offer a bargain, another to appear desperate, and that sign conveys more of the latter than the former. It's a sign that might befit a South Strip motel but not one of the dowagers of the Strip.

If you've got 'em, don't smoke 'em: In light of a New Jersey court's ruling against the Claridge Hotel Casino, The Press of Atlantic City is editorializing in favor of a total ban on smoking on the state's casino floors. The court found the Claridge liable for cancer caused by exposure to second-hand smoke. Dealer Kam Wong lost a lung and now the Claridge's owner, Harrah's Entertainment, stands to lose some money. Given the choice between more such lawsuits and pissed-off, cigarette-loving patrons, The Press says, Choose Door #2.

In other A.C. news, the wave of new construction in Atlantic City means that city fathers are facing a problem familiar to Las Vegans: How do we get all these people here and where do we put them? Boyd Gaming's Borgata deserves kudos for its free bus service, which costs the company peanuts, and Pinnacle Entertainment, another of the classiest outfits in the industry, is looking at infrastructure issues as part of the total package of its Atlantic City resort development (much as the company is doing in Baton Rouge).

Another Baton Rouge bulletin

Wed, 13 Feb 2008 13:20:00 -0700

Columbia Sussex's mooted flip-flop of its Belle of Baton Rouge and Amelia Belle riverboats turns out not to have been a snap decision in the wake of a pro-Pinnacle Entertainment vote in Baton Rouge. Seems that the company has been laying the groundwork for two months now. Both St. Mary Parish and Louisiana regulators still have to sign off on the switch, which will also require some retrofitting of the Amelia Belle.

Although the Belle of Baton Rouge will be moving to a smaller market, Columbia Sussex promises city fathers in "the Morgan City area that employment will not be changed much with the boat switch."

Now where have we heard that before? Oh yeah: Evansville, Atlantic City, Baton Rouge, New Orleans, Las Vegas ...

And although William Yung III's $7 million investment in a possible casino site in Covington, Ken., may seem like betting on the Raiders to win the next Super Bowl, when you've spent billions to acquire Aztar Corp., seven mil is just walking-around money.

Pinnacle wins in Baton Rouge

Mon, 11 Feb 2008 16:38:00 -0700

Backed by 56% of local voters, Pinnacle Entertainment has received the green light for its "Riviere" project in East Baton Rouge. No doubt this means some long faces at Penn National and Columbia Sussex, both of which mounted a full-bore effort aimed at keeping Pinnacle out. But voters weren't swayed. Pinnacle's promise to bear the cost of infrastructure burdens surely didn't hurt, either.

At least one competitor isn't taking this lying down. Columbia Sussex is reportedly mulling a plan to yank its Amelia Belle (formerly the Belle of New Orleans) from Amelia, La., and re-berth it in Baton Rouge, displacing the smaller Belle of Baton Rouge. As for what Columbia Sussex would do with its Amelia license, that remains to be seen.

@#*& hits the Columbia Sussex fan

Wed, 30 Jan 2008 13:26:00 -0700

Those intimations of insolvency at the Las Vegas Tropicana are now swelling into full-blown accusations [second item] leveled at Columbia Sussex HQ in a $960 million lawsuit. And not just any old insolvent but "deeply insolvent." Whatever detente CEO William Yung III negotiated with lenders to stave off bankruptcy late last year has proven short-lived. What's more additional payroll troubles are being alleged at the Trop.*

The Delaware lawsuit would, among other things, enjoin Yung from selling Casino Aztar, its Belle of Baton Rouge and the Vegas Trop. It also seeks to hold up the already announced sale of Horizon Vicksburg to Nevada Gold.

Being cut off from its prime casino cash show, the Atlantic City Tropicana, appears to have dealt a severe blow to Columbia Sussex. (Some argue that Yung killed the cow for its meat, rather than milking it, but that's another discussion.) It also means that debtholders, who have seen C.S. bonds lose 18% of their value, could lose their shirts -- or at least get a haircut.

If that's not enough, Bays Investment Corp. is backing off its planned purchase of Columbia Sussex's Charleston House Holiday Inn, after discovering that the property was already encumbered. Whoops.

Oh, and a lawsuit between Columbia Sussex and landlord Park Cattle Co., which has tried to evict C.S. from the Lake Tahoe Horizon, is slated to go to trial Feb. 11.

*-- Of course D. Taylor is not exactly a disinterested party in this matter, seeing as he's been trying (without success) to pry a reasonable contract offer from Columbia Sussex. No doubt he fervently wishes the current regime would get booted in favor of newer, more tractable ownership.

In related news ... The Baton Rouge Business Report opines in favor of bringing Pinnacle Entertainment to Red Stick. And annonymous poster "bontemps" needs to do a smidgen of research. Say what you like about Pinnacle, a piker it is not.

Betraying signs of unease about trends in Atlantic City, Colony Capital is putting an expansion of its A.C. Hilton in abeyance and is peddling an interest in the property, much as it previously did with the Las Vegas Hilton.

A Pennsylvania casino owner has been hit with four counts of perjury, indicted for allegedly lying about his closeness to Mob members. If you're a member of the Glass Half-Full Club, it's good news for Atlantic City -- and New York racinos.

In unrelated news, the business world makes progress.

What did we do to deserve this? OTOH, gratitude in politics sure runs shallow. It kinda makes you feel sorry for old Shrub.

Rambo (which premiered at the Aladd ... er, Planet Hollywood Resort & Casino) is deemed the worst move ever. I still think that dubous honorific is up for grabs between Bloodrayne and The Pirates of Tortuga. But wait: Bloodrayne has The Lokenator, Pirates does not. Pirates of Tortuga wins/loses! To the plank!