David Mckee's Stiffs & Georges - Missouri

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.

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?

Illinois does it again; Storm over CityCenter

Thu, 20 Aug 2009 15:07:00 -0700

A new law in Illinois that legalizes video poker statewide may have some unforeseen consequences. Namely, video gambling at truck stops throughout the Land of Lincoln. This represents a much bigger expansion than was originally sold to the public. Whenever you think Illinois' casino industry has finally hit bottom and might begin to recover from previous legislative sabotage, it gets pushed off yet another cliff. New casinos licenses may soon be available in Missouri (1) and Iowa (4-5). Riverboat operators in Illinois should seriously consider hoisting anchor and moving across the river.

CityCenter suit. This one alleges basically that MGM Mirage pumped and dumped its stock, and misrepresented its chances of funding CityCenter. The allegations may prove more entertaining than true but they will certainly make lively reading.

Wait Until Dark. If you prefer an evening at the theater to curling up with a lawsuit, you can't go wrong with CSN's presentation of Frederick Knott's 1966 thriller.

Boyd, Ameristar stable; CityCenter schedule revised

Wed, 05 Aug 2009 11:10:00 -0700

Second-quarter results from Boyd Gaming and Ameristar Casinos gave continued reason to be sanguine about each company. Both reported profits (12 cents per share at Boyd, double that at Ameristar) and both missed their revenue targets by an aggregate of only $8 million. A whopping (27%) jump in Colorado revenues for Ameristar last month was additional reason for confidence, offsetting weakness in Kansas City.

Cost control was credited with helping Boyd's performance, as was much-better-than-expected cash flow at Borgata. The Las Vegas locals market also ran ahead of expectations in that regard, while downtown and the Midwest/South casinos lagged. Bankruptcy filing or no, Boyd maintains that it continues to be a suitor for Station Casinos. Oh, and keeping Echelon mothballed -- while the least expensive of alternatives -- isn't cheap, costing Boyd $3 million a month.

MGM Mirage has sent LVA a revised, official list of dates for the debut of the various bits and pieces of CityCenter. (Excepted, of course, is the Harmon[ini] which, as of last Wednesday, had no firmer opening date than "late 2010.") The openings are as follows:

Vdara (Dec. 1); Crystals (Dec. 3); Mandarin Oriental (Dec. 4); Aria (Dec. 16), while condo closings in Veer Towers are set to "begin in January." When MGM gave a CityCenter dog-and-pony show to the Nevada Hospitality & Lodging Association last week, the computer graphics still showed Baldwin's Bump at its original, 48-story height. Also, the bluish tint that denoted CityCenter's acreage, by quirk or design, extended to embrace the Cosmopolitan. A portent?

'Show Me' no stinkin' IDs

Mon, 27 Jul 2009 18:46:00 -0700

"We don't want them in there," huffs Ameristar Casinos' Troy Stremming (left) with regard to pathological gamblers. Stremming's high dudgeon rings a mite hollow now that the Missouri ballot initiative he crafted and shepherded to victory last fall is providing a free pass for problem gamblers. Once boarding requirements were repealed, away went the mechanism for screening self-banned gamblers. Whoops.

It's not like they still can't be caught on-property, though. Woe betide the player who hits a sufficiently big jackpot for his slot machine to go into "IRS lockdown." His identity has to be verified -- which means he can kiss those winnings goodbye and prepare to be handcuffed. To quote Geena Davis in Thelma & Louise, "The law is some tricky shit."

But Missouri's got nothing on Illinois, where casino employees double as "bounty hunters." If you're a self-banned player who's shooting dice at Alton Belle or Casino Queen, there's literally a price on your head.

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.

Rough trade

Mon, 13 Jul 2009 18:09:00 -0700

May wasn't great for Las Vegas, to say the least, with hotel occupancy -6%, a figure somewhat amplified by the presence of 3% more hotel rooms. The local ADR of $96.96 would have been regarded as real money back in the day. Hoteliers now are more likely to look at it in the context of the -28% shift from last year's rates. More worrisome is that convention attendance (-33%) outslid the number of conventions held (-26%), whereas it used to be the reverse.

Indiana has absorbed the effect of its two new racinos. Casino revenues were flat in June, a decline at most boats offset by the extra dollars generated at Harrah's Entertainment's Horseshoe Hammond (+13.5%) and Boyd Gaming's Blue Chip (+4%), both of which recently expanded. Penn National was hurt by the switchover to Hollywood Casino Lawrenceberg, its new vessel, and Ameristar East Chicago (-15%) withered under the glare of Horseshoe Hammond.

Illinois is scraping along, having evidently struck bottom ... for now. Once the impact of a fire-closed Empress Joliet was backed out, Illinois was down a mere 3%. That's practically a moral victory. Of course, with the institution of slot routes en route and the Lege contemplating a huge casino expansion in the state, any celebration will be short-lived. Harrah's Joliet was the logical beneficiary of the Empress Joliet shutdown (+5%), while MGM Mirage's Grand Victoria spiraled -17%.

There were a few gainers, ranging from miniscule (Boyd's Par-A-Dice) to massive (+109% at independent Casino Rock Island). East St. Louis-based Casino Queen finally lost a significant chunk of business (-11.5%) to its augmented Missouri rivals, while Penn's Alton Belle kept its leakage to -3%.

It's not a free market. Lawmakers in the Land of Lincoln have not only introduced slot routes, they may add four more casino licenses to the state. Factor in Neil Bluhm's casino project in Des Plaines (license #10), and the gambling market in Illinois becomes seriously diluted. However, no compensatory tax reduction is on the table.

When it comes to casinos and taxes, solons think simply that more = more. However, in a state where competition is limited by statute, not only does guvmint control the levers of the market place it has an obligation to take the economic consequences of its actions into account. This is not being done and the repercussions are likely to be severe.

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?

Warning signs at Harrah's

Fri, 13 Mar 2009 14:28:00 -0700

Fourth-quarter and year-end numbers from Harrah's Entertainment are out and the report raises several red flags:

• Harrah's absorption of Park Place Entertainment has left the company seriously overexposed in Las Vegas, where revenue was down 20% in 4Q08, compared to much smaller declines in non-Nevada markets.

• Even though most regional markets showed or regained strength in the last quarter (Atlantic City and Illinois being notable exceptions), Harrah's remained weak. This trend continues to be confirmed by revenue reports from individual states. Last month, in Missouri, Harrah's was the only operator to register a decline -- even Isle of Capri is doing better. Something is very wrong here.

• One of the company's top cost-saving measures is to cut jobs. This was a foregone conclusion the moment the Harrah's LBO was consummated but, in such a customer-service-intensive industry, if the reductions are taking place in the front lines of the workforce, expect business to continue suffering.

• Another high priority for reduction: marketing expenses. There's a term for this and it's called "death-spiral marketing." That's where your revenues are down so you reduce your marketing outlays and if business continues to decline so does the marketing budget ... and so on. Which is too bad, because Harrah's has been launching some of the better casino ad campaigns I've seen in the past year. It would be a shame if all that creativity wasn't used to its full potential.

This is your industry on crack

Tue, 03 Mar 2009 18:06:00 -0700

Finally, someone (in this case, Liz Benston) has written the definitive user-friendly analysis of how the casino industry crashed and burned. To try and quote the salient points would require little short of reprinting the entire article (to say nothing of its copious charts).

In essence -- as run through the S&G juicer -- we're dealing with an industry that could be said to have lost its marbles four to five years ago. As I've contended on the Vegas Gang podcasts, captains of the casino industry, borne aloft on a bubble of illusory "wealth," mistook a bubble for a baseline. Instead of paying down debt on acquisitions, they doubled down on extra-super-megaresorts and wholly unncessary LBOs.

And now that the party's ended, the resultant hangover is shaking out the business like a case of the DTs. The irony is that Strip revenues have reverted to 2005 levels ... back when business was pretty darn 'phat,' and MGM Mirage and Harrah's Entertainment were so flush they were able to devour Mandalay Resort Group and Park Place Entertainment, respectively, with scarcely a burp.

One of the few things now standing between insolvent casino companies -- a group that may soon include both Harrah's and MGM -- and outright disaster is that gaming has become "too big to fail." In an otherwise normal economy, collapsing companies like Herbst Gaming, Black Gaming, Colony Capital and even big shots like Station Casinos would probably be staring receivership in the face. But extraordinary forbearance -- in more than one sense of the term -- by lenders is keeping the lights on and the doors open. The bankers and bond markets have obviously decided it's better to keep their wobbly dance partners upright than let gravity take its course. Lord knows, the seismic impact of a cascading series of casino bankruptcies beggars the imagination and not in a good way.

Into this maelstrom, is flung the news that two companies are going to miss their scheduled 10-K filings. In the case of Pinnacle Entertainment, they need some extra time to perform mark-to-market ledger-demain, writing down $275 million-$330 million. J.P. Morgan analysts are sanguine, though, partly because of an 18% increase in fourth-quarter revenue. Also, although Pinnacle's net loss may be as high as $308 million, other results "should be above expectations, reflective of PNK’s strong Louisiana performance at Lake Charles, stable New Orleans trends, and a ramp at Lumiere [Place] in St. Louis. Trends that, generally, should continue."

Also playing for time is MGM Mirage. According to the Sun, last week's draw-down of credit has tapped out the company's liquidity, a statement confirmed in a J.P. Morgan note. Contrarily, the Review-Journal implies there's plenty left.

(Update: MGM tells me, no, there isn't and I was wrong to have concluded otherwise last week. Error duly noted. Self-flagellation in progress.)

Whatever the case, Wall Street is sounding like it's accepted that Chapter 11 is all but inevitable. Slightly less apocalyptic scenarios still include potential defaults, debt-for-equity swaps that would surely cost Kirk Kerkorian his majority ownership, asset sales, a restructured balance sheet and a $7 billion note that's less of a balloon payment than an incoming Hindenberg.

Or, as Morgan analysts write, per their wait-and-see strategy: "We expect to hear from MGM over the next few weeks, and suspect it is or shortly will be working with its banks on amending its bank covenants (leverage covenants now likely tripped after drawing down debt last week and hoarding cash) and looking to restructure its bank debt, among the other options MGM is considering (asset sales, amending CityCenter, etc.)."

Emendations to CityCenter? That would be an extremely bitter pill for MGM to swallow. First the Harmon truncation, now this prospect. In a totally unscientific measurement, page views of our online image gallery of Aria and Vdara were barely a ripple compared to the levels of interest manifested in Encore, M Resort and, good golly, even the Cabana Suites at the El Cortez -- all of which have vastly outpaced Aria/Vdara in viewership. Like I said, unscientific but who'da thunk we'd see an El Cortez ≥ CityCenter equation?

And we still haven't touched upon today's earnings report from Isle of Capri (half good, half bad) or the latest round in the Station-vs.-Boyd catfight, chock full of hissing and spitting. We live in interesting times, to be sure, regardless of whether that's a blessing or a curse.

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.

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.

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.)

Quote of the Day

Wed, 15 Oct 2008 17:41:00 -0700

“Now is not the time to overreact. You’ve got to maintain your strategy … buckle down” -- Harrah's North Kansas City Casino & Hotel General Manager Tom Cook, offering his prescription for coping with a shrinking market.

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.

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."

Stiff drink, limp journalism; Kansas City conundrum

Tue, 12 Aug 2008 14:58:00 -0700

While the Las Vegas Review-Journal may think its drinking-at-CityCenter exposé is hot stuff, this report is pretty weak tea. (Assuming that one can follow the mumbling, sometimes incoherent voice-over.) Worst of all are its snide insinuations that six workers died at CityCenter because they -- or someone else -- was boozing it up. Talk about drawing a conclusion not supported by facts in evidence.

Let's review, shall we? The story involves "a handful of construction workers" (out of 7,700) and covers the period June 13-July 24. Over those six weeks, R-J staff made visits to bars near CityCenter on eight occasions, observing four incidents of drinking involving 10 workers, total. The cover-your-ass caption verbiage about "apparent construction workers" (emphasis added) doesn't inspire confidence, either.

Obviously, the thought of liquored-up ironworkers at CityCenter is disturbing in any number of ways (especially if, like me, you're ever found yourself the hood ornament on a drunk driver's car). But the rapidly anti-regulation R-J is a very poor messenger. As its own coverage has noted, this problem falls outside of Nevada OSHA's mandate. So much for the glories of deregulation.

Since R-J owner Stephens Media mandates drug testing without probable cause for all potential hires, maybe it's on some kind of temperance crusade to gin up (pardon the pun) legislation to enshrine that practice in law. (That's the central thrust of this story.)

In any case, whereas the paper's reportage of the renegade renovations at sundry Harrah's Entertainment hotels was admirably thorough, this is slapped-together stuff, trying mightily to imply a cause-effect relationship it can't factually support. The Harrah's series had eyewitness testimony, reams of supporting documents and on-site professional inspections to buttress its assertions. The CityCenter series, by contrast, is so heavily reliant on a small amount of anecdotal evidence that I still can't quite believe it made it into print.

Kansas City half-full or half-empty? Fewer people are going to Kansas City's casinos. So that's bad, right? But revenues are ever-so-slightly up. That's good, right? Well, it's good if you're Penn National or Ameristar, who are pulling business away from Harrah's and Isle of Capri in droves.

It's not surprising to see Isle bringing up the rear but I'd think a brand as strong as Harrah's wouldn't be in the same pickle (in fact, its decline is actually worse than Isle's). Then again, when it comes to riverboats, Ameristar has been one of the strongest brands around, second to few save Argosy (now owned by Penn National). Score one for the niche operators.

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?