David Mckee's Stiffs & Georges - Wall Street

Quote of the Day

Fri, 23 Oct 2009 17:46:00 -0700

"Steve Wynn was the worst offender on that score. Last year, he used his aircraft for a $1 million of personal travel, which Wynn [Resorts] shareholders paid for. To do $1 million worth of travel, I worked it out that you’d have to fly to Hawaii and back every week for a year to rack that kind of a cost up." -- investor activist Eric Jackson, founder of Ironfire Capital, on the subject excessive perks in the casino industry.

Quote of the Day

Wed, 21 Oct 2009 17:28:00 -0700

Penn National Gaming "has not lost its senses and, [contends] that at the right price and through the right vehicle (and only with a sizable strategic partner who would bring something special to the project, presumably some hotel experience), its involvement in Fountainebleau could make sense.” -- quote from Penn's 3Q09 earnings report, according to J.P. Morgan analyst Joseph Greff. This is the first we're hearing about joint-venture F-bleau partners, though.

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.

Macao giveth, Macao taketh away

Tue, 13 Oct 2009 17:41:00 -0700

Casino operators in Macao better make the most of the recent relaxation of visa quotas into the enclave. What the government gives with one hand, it partly reclaims with the other. Casino expansion remains out of the question and the minimum age for gambling would go up to 21, from 18, under a bill draft soon to be put forward. (Steve Wynn can afford to be sanguine, as it's far more likely to impact his mass-market-oriented competitors. Investors didn't share his enthusiasm.)

If Wynn -- who continues to toe the Peking party line -- comes out a winner, facing negligible "obstacables," Lawrence Ho is the presumptive loser. As best S&G can ascertain, the curtailment of gambling in residential areas is aimed at his Mocha slot routes, one of the younger Ho's bread-and-butter enterprises.

Another proposal awaiting action by the Macanese Lege would cap table-game inventory. Writes J.P. Morgan analyst Joseph Greff, "we believe the Macau government believes the timing is right to implement these initiatives given the completion of the commission cap rule and the resumption of growth in the industry ... if the number of tables will be limited to 1,000 per operator, [Las Vegas Sands] may need to modify its future expansion plans, as it is already over the limit, while SJM will need to close down some of the older tables operated by the third parties, as it too is already over the limit."

None of this appears to bode especially well for Sands' long-in-coming IPO, although it remains to be seen whether this is a bonafide legislative agenda or simply a warning to inhibit growth. The news, however, managed to cast a pall over Sheldon Adelson's planned resumption of his Cotai Strip™. Also, it's not as though the Macanese government and its casino-owning subjects don't have to worry about an upsurge in gambling back on the Mainland.

Detroit, briefly. The depression continues to eat into Detroit's casino revenues, -2% last month. Despite a -6.5% drop, MGM Grand Detroit remains the big cat, grossing $42 million. Second place is up for grabs, though, as MotorCity continues to fall back (-7%) toward upstart Greektown (+12%), which is closing the gap, grossing $28.5 million against $33.5 million for MotorCity.

Signs of the Times

Wed, 07 Oct 2009 14:02:00 -0700

You know the casino industry's in the crapper when, next week, Spectrum Gaming Group is hosting a conference entitled, Distressed Gaming Properties: The State of the Industry. This is so hot-of-the-presses Spectrum hasn't even got the registration page up ... yet.

Quoth Spectrum's e-mail blast: "With the recession battering gaming jurisdictions from Connecticut to Nevada, a new sector of the industry has come to the fore: distressed operations. Investment firms now have funds that specialize in distressed gaming assets, regulators are being asked to deal with situations they never considered, and operators are turning to outsiders to either right their operations or provide interim management services. In this session, experts will discuss the benefits and risks to distressed Gaming M&A, and how regulations and bankruptcy court can impact a successful takeover. They will also discuss how to properly apply multiples, and how EBITDA can be enhanced by skilled operators."

Maybe Penn National Gaming CEO Peter Carlino should attend this before he goes all in on Fontainebleau. His spokesman says Penn "is evaluating other Las Vegas opportunities." They may have "evaluated" Planet Hollywood right out of their grasp and passed on God knows what else. But F'bleau? That's a keeper. Yeah.

Quote of the Day

Wed, 07 Oct 2009 13:57:00 -0700

"Once the markets start believing our company won't go into bankruptcy, our stock will be up to $75 a share again." -- incurable optimist Sheldon Adelson, to Forbes magazine.

$300 mil for F'bleau?

Tue, 06 Oct 2009 13:10:00 -0700

That's the latest; namely, that Penn National Gaming will put down less than $300 million as a "stalking horse" bid on Fontainebleau. Penn would also be on the hook for the costs of the project's bankruptcy proceedings. Potentially getting a Strip resort for less than 10% of its cost sounds like a good deal for Penn ... until you think about the hundreds of millions of dollars (possibly as much as $2 billion) that stand between F'bleau and the finish line.

Sue Lowden evidently didn't get the memo that Mike Ensign is no longer writing fat campaign checks at Mandalay Resort Group. How else to explain the Archon Corp. treasurer's loud and frequent fealty to Ensign fils, the ethically challenged junior senator from Nevada? Lowden's proclamations provided an irresistible temptation for Democratic Senatorial Campaign Committee spokesman Ed Schultz, who sniped, "Sue Lowden's support of John Ensign may have fundraising value to her, but it is a reflection of her own character and fitness for office. She has shown more fidelity to him, than he has shown to his own wife." (Lowden is gunning for Sen. Harry Reid's seat.)

In her capacity at Archon, Lowden could line the younger Ensign up with a dandy post-senatorial job as a casino greeter at her Pioneer Gambling Hall in Laughlin. (As for Lowden, at least she's off Jon Ralston's "Chicken List," after gracing the Face to Face set. Your turn, Sheldon Adelson. Does Sue Lowden have more huevos than you?)

The perils of Packer. Reeling from a $1 billion loss on his overseas casino misadventures, James Packer and his Crown Ltd. are putting some of their Melbourne land on the block.

Not buying it. Although MGM Mirage CEO Jim Murren may have predicted that CityCenter's premiere would increase Vegas visitation by 10%, but gaming analysts aren't having any of it, especially when all the new room capacity is at the high end. Also, it's remembering that the 1998-2000 roll of megaresort openings and the 2005 debut of Wynn Las Vegas coincided with robust U.S. economies. Andrew Zarnett advises casino bosses to look at current numbers as the new baseline -- which sure beats pining for the vertiginous and unsustainable levels of two years ago.

Macanese machinations. Conventional wisdom on the advisability of floating IPOs in Hong Kong continues to seesaw. The Wall Street Journal runs the numbers and finds gaming stocks defying the market's downward trend. Which is good news for Steve Wynn and possibly even Las Vegas Sands' public offering, which is taking forever to reach the launch pad.

Quote of the Day

Tue, 06 Oct 2009 12:32:00 -0700

"The industry is seeking a new equilibrium. The last period was one where people were drunk on the use of capital and used it to solve every problem. Clearly that can't continue." -- Harrah's Entertainment CEO and newly minted fiscal-temperance crusader Gary Loveman.

Adelson's rescuer?

Wed, 30 Sep 2009 14:01:00 -0700

Meet Wilbur Ross. He's an investor of all trades with an appetite for distressed assets. And he's turning his sights to the casino industry. In particular, he's drawn a bead on "companies [who] are also looking at selling assets in the Chinese gambling enclave of Macau to support struggling operations in Las Vegas."

That means either Las Vegas Sands or MGM Mirage, and it's old news that Sheldon Adelson has been peddling a couple of retail malls and the non-casino aspects of Sands Macao (above). MGM is attempting a reboot (successful so far) of MGM Grand Macau but still might come up short on completion money for CityCenter, especially if condo prices have to be reduced. And it doesn't take a rocket scientist to figure out that one Macanese casino beats any number of hotel rooms or retail outlets.

Un-Trumped? Thwarted Trump Marina suitor Richard Fields is making another run at the property, which he's been trying to buy since Homer was a pup. Better still for him, he could get it for as little as $75 million. However, he's got dark-horse competition from a Maryland-based private equity fund that's making a play for all three of the Trump Entertainment Resorts casinos.

Notorious for mainly hanging its corporate shingle in tax-haven Green Valley, would-be casino operator Empire Resorts is not only re-headquartered in New York State, it's got new partners. Some of them bring checkered pasts to the table.

Also, Empire's hopes hinge upon the current administration reversing an especially paternalistic ruling from the George W. Bush years: namely, that casino sites must be within commuting distance of the tribal owners' -- in this case the St. Regis Mohawks -- reservations. If economic self-sufficiency is the endgame of federal/policy, Uncle Sam needs to loosen the apron strings.

Unready for some football. The unceremonious scrapping of Monday Night Football events at The Cannery is explained (second item). Magic word: clearance. Columnist John Katsilometes also notes that the second weekend of Zowie Bowie's Vintage Vegas was better than the first. Which would mean it's graduated from "bad" to "mediocre."

New England moralists are apparently OK with slot machines in Rhode Island, so long as they're covered by the fig leaf of mandatory greyhound racing. At least the slot players have a chance of actually catching the rabbit, metaphorically speaking. Animal cruelty is bad enough but when it's enshrined in state law it's even more objectionable, if such a thing is possible.

Masters of the Obvious II

Tue, 29 Sep 2009 13:36:00 -0700

Regarding the punting of casinos from Penghu, the great minds of Wall Street put on their thinking caps and came up with the following, as paraphrased by the Las Vegas Review-Journal: "analysts said the vote could be a viewed as a positive indicator for Macau's gaming market, eliminating a source of competition."

Gee, ya think?

Actually, Union Gaming Group's Bill Lerner adds a dash of sanity, rating the Taiwanese market as "marginal" and raising the hitherto-unasked question: Just what's the likelihood Peking would allow Chinese citizens to start hopping planes and ferries to Taiwan, to fritter away Mainland currency?

Too bad, though, for Navegante Gaming Group founder Larry J. Woolf, who bet heavily on Penghu and lost at the ballot box. Having taken the proactive (or rash, according to one's perspective) step of cobbling together beachfront acreage, Woolf has the unenviable choice of trying to sell it -- in which case, he's dealing from a weak hand -- or trying to make lemonade by building a non-casino resort. That way, he can at least bide his time until the '12 elections come around.

Even before the wheels started coming off the casino industry in earnest, there were portents that it was reaching a saturation point in the U.S. It was inevitable. New jurisdictions were steadily opening, established ones became thicker with competition and the average American's income hasn't been rising at a level that would keep pace with galloping casino growth.

There's only so much discretionary income to go around and the industry was bound to hit the wall. The current depression merely accelerated and amplified the resultant "Thud!"

One casualty of this collision is Rivers Casino in Pittsburgh, whose slot revenues are running 22% below projections. That's causing Standard & Poor's to hint darkly at default, maybe even bankruptcy. Despite being in a prime market, Rivers Casino is performing seventh among Pennsylvania's nine casinos, which means fifth-place Sands Bethlehem has to be upgraded from "flop" to "mild underachiever."

One can't really blame current Rivers ownership. It inherited the $800 million (!) project after original owner Don Barden ran way over budget, then ran dry. However, it's a good thing the local property-tax assessor is currently undervaluing the Rivers site because Neil Bluhm (who breaks ground in Philadelphia next week) needs those extra $$ far worse than we thought.

Hell no, they won't; Penghu punk'd; Barbarians at the gates (again)

Mon, 28 Sep 2009 19:12:00 -0700

Pay taxes, that is. Two Indiana racinos are pushing back against a tax rate that averages 38%. Considering that the two tracks -- one run by Cordish Gaming -- are the newbies on the Hoosier State scene, one could fairly ask them, "Didn't you know what you were getting into?" As the article notes, neither Harrah's Entertainment and Boyd Gaming -- both which recently heavily reinvested in Indiana -- aren't whining about their tax rates.

But the racinos have a point. In states where the number of casinos is artificially capped by the Legislature, solons become the custodians of the industry's economic future, like it or not. And it only stands to reason that if the market is going be diluted, tax relief is in order. Considering that same-store revenues in Indiana have been nothing but down since the racinos opened, some push-back on the tax front was probably inevitable.

Hell no, they won't either. Allow casinos in Penghu, that is. Voters on the Taiwanese island voted against gambling expansion there, putting the issue off-limits for three years. The notion of planting mega-million-dollar casinos in remote, hard-to-reach parts of Taiwan never made that much sense to S&G, but big industry players like Sheldon Adelson and Gary Loveman have kicked Taiwanese tires in the recent past.

Did Adelson and Steve Wynn mistime their leap into the Hong Kong stock market? One Wall Street Journal columnist thinks so. Bad timing isn't the exclusive province of the public sector, though: A Washington State tribe borrowed $375 million on the strength [sic] of revenue forecasts that proved grossly over-optimistic. Percentage-wise, neither Harrah's nor Station Casinos missed the mark this badly.

Bob Stupak, R.I.P. The penultimate Vegas maverick is gone, having spent much of the last decade as a recluse. One especially thorough obit contains a quote by former Klondike owner John Woodrum that ought to be engraved on Stupak's gravestone (or at the base of that now-vanished Stupak statue): "If ever there was a guy beyond the rim of reality, there was Bob. But somehow he made reality happen."

Just what we don't need. They're baaaaack. Never mind the smoking wreckage they've made of Harrah's and Station, private-equity firms are rooting amidst the flotsam, looking to extend their morbid clamp on the casino industry. Leading the pack is Leon Black's inaptly named Apollo Management. Both indirectly (Planet Hollywood by way of Harrah's) and directly (Cosmopolitan, Fontainebleau), Black is reported to be scarfing up what few independent properties remain, raising the prospect of a Total Rewards oligopoly stretching from just above CityCenter to the southern frontier of the The Mirage.

There are also a few bottom-feeders in play. Hooters hardly seems worth buying unless Onex Corp. wants to do a tear-down and extend the Tropicana Las Vegas eastward. Current ownership of the Riviera is tapped out but the place still has prospects as a fixer-upper (not something that fits with Apollo's sack-and-pillage business model). If non-bottom-feeder Green Valley Ranch is really on the bubble of insolvency, then Penn National Gaming ought to quit chasing F'bleau, and try to drive a wedge betwixt Station and its Greenspun family partners. Penn would stand to inherit a beautiful property with far fewer problems than Big Bleau.

Robo-poker reprieved ...

Mon, 28 Sep 2009 18:08:00 -0700

... but maybe not long for long. A momentary uptick in the price of PokerTek stock temporarily rescued it from penny-stock status. But after decisive rejections of dealer-less poker in both Las Vegas and Atlantic City, the future of PokerTek as anything other than a marginal supplier looks bleak.

Vegas casino operators continue to learn that you can't export the Strip business model to Macao (our over-optimistic expectations to the contrary). Case in point: Wynn Macau, which is cannibalizing restaurants, kitchens and even a showroom to make room for more gambling positions. A sanguine-sounding Steve Wynn, meanwhile, yawns in the face of competition from Singapore and tries to spin his Macanese IPO as a philanthropic gesture.

Neil Bluhm's big break. Although $800 million Rivers Casino in Pittsburgh maybe up and running, the county assessor continues to tax the site as though it were empty land. As the bureaucrats let tens of millions of property-tax dollars slip through their fingers, casino owner Neil Bluhm has a chance to bank some serious coin here. That'll take a little of the sting out of Pennsylvania's 55% gross-revenues tax rate.

A Texas track that's now come into tribal hands may hold the key to the future (if any) of limited Vegas-style gambling in Texas. The Lone Star State's gubernatorial aspirants are all over the map. Sen. Kay Bailey Hutchison (R) has cozied up to the Stone Age anti-gambling crowd, making Gov. Rick Perry's (R) qualified pro-gambling position preferable ... even though Perry would still relegate Indian tribes to the back of the bus.

S&G likes candidate Kinky Friedman best on this issue (the Kinkster is pro-casino, period), while Tom Schieffer (D) is back in the Dark Ages somewhere with Hutchison. Hank Gilbert occupies a wussy, "let's take a poll" middle ground somewhere between Perry and his GOP rival.

Crime doesn't pay; Wyden wimps out

Fri, 25 Sep 2009 14:19:00 -0700

Five dimes worth of damage, $40,000 bail -- and all to wrest a measly two grand from some vending machines at Harrah's Atlantic City. That's the losing bet made by two security guards. Couple this with the floormen who destroyed their careers for a comparably picayune sum of money they allegedly scammed from Planet Hollywood, and we're seeing a level of desperation in casino crime the likes of which I can't recall.

City of Dreams. Voters in Ohio haven't approved casinos in any form yet, but that's not stopping Cleveland Cavaliers owner Dan Gilbert, who's already had a design executed. Gilbert has lined up critical support by promising to forego hotel rooms and restaurants (though he's left himself a little wiggle room there).

But don't be fooled: Phil Satre used the same Trojan Horse strategy to get an onshore casino in the heart of New Orleans. A few bankruptcies and legislative showdowns later, Harrah's N.O. has a hotel and a couple of restaurants. (Like it or not, Satre was brilliant.) I'll be so not surprised if Gilbert gets his casino, then discovers the numbers don't pencil out at a 33% tax rate, and starts waffling on his non-aggression pact with hoteliers and restaurateurs.

Damn that vox populi! Seems that Harrah's Entertainment had a bit of contractual noblesse oblige written into its pact to purchase Thistledown Racetrack. If the issue of racinos has to be put to a vote of the people, all bets -- so to speak -- are off. Which means that Harrah's can take its $89 million and skedaddle, leaving bankrupt Magna Entertainment holding the bag. For the moment though, Harrah's is playing the issue down, saying talk of a pullout is "premature" and hasn't been given much thought.

Even Las Vegas Sands appears to be feeling disappointed with early results from Sands Bethlehem. A massive, 2,000-slot expansion, slated for November, has been scaled back by 88%. Even so, Pennsylvania casinos are busy planning for the addition of table games (although the Lege hasn't approved it yet). The price of table games will probably be higher (18% tax + $15 million upfront) than casinos want, but at least they've been successful in battling back an expansion-sapping 34% tax rate on tables. For slots, they still have to pay a usurious 55%, one of the worst rates in the nation.

But if Sands wants to maximize its drawing power, it might want to think about finishing the hotel and other amenities that got shoved onto the back burner when Sheldon Adelson's coffers began to run dry. At least Sands has gotten a temporary reprieve from sliding to sixth place because -- even with financing in place -- Neil Bluhm is taking a go-slow approach to his $355 million Philadelphia casino, out of deference to historical preservations. (Funny how Bluhm can build a Philly casino complex for half of what Adelson blew on his unfinished Bethlehem resort.)

Fortune favors the bold, which means it won't smile upon Sen. Ron Wyden (D-OR), who apparently caved to pressure from increasingly useless and counterproductive Sen. Harry Reid (D-NV). It looks like Hapless Harry is behind Wyden's craven withdrawal of an amendment that would have taxed Internet gambling to help pay for health care reform.

Incidentally, an amendment that would have authorized $100 billion to close the infamous Medicare "doughnut hole" was voted down yesterday. Jeez, those 'Net-bet taxes could have come in handy as an alternative means of plugging the hole. (Oh, and fuck you too, Max Baucus.)

And that goes double for you, stock-picker Jim Cramer, whose spam rips through our LVA filters like Japanese torpedoes through the hull of the U.S.S. Oklahoma. It makes me sorry I ever said anything nice about you, Jimbo.

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.

Bad bulletins for Sands & Strickland

Tue, 22 Sep 2009 12:03:00 -0700

Last week, Audit Integrity identified the 20 companies most at risk of bankruptcy (minimum market capitalization: $1 billion) and the lone gambling operator on the list was Las Vegas Sands. On Friday, Business Insider piled on. Pruning Audit Integrity's list of any firms with market cap below $3 billion, that still left nine companies ... and Las Vegas Sands.

Quoth the Insider: "Conditions in Las Vegas are horrible, Asian expansion isn’t enough, and if this lasts too long then LVS will end up in bankruptcy court looking like it bit off more than it can chew."

Marina Bay Sands: a megaresort too far?

No shit. With an unfinished casino-hotel in Pennsylvania and the abortive St(ump) Regis condo on the Strip, Sheldon Adelson has too many fingers in too many pies. Plus, his $5 billion Singapore albatross will get beaten to the starting line by subsequent entrant Genting. And even with a sudden easing of access from mainland China to Macao, it's too soon to be going pedal to the metal on the remainder of the Cotai Strip™, as Adelson would clearly like to do.

(As though to twist the knife in the wound, retail developer Taubman Cos. made a point -- in the course of reiterating its interest in a rival project -- of saying it wasn't in the market for the two shopping malls Adelson is desperately trying to unload.)

Ohio's supreme court delivered a swift kick to the groin of Gov. Ted Strickland (D) -- and to the casino industry's hopes for imminent expansion into Ohio. By a 6-1 vote, the high court ruled that addition of seven racinos needs to go before a vote of the people, throwing as much as a 14-month hitch into the process.

If that weren't enough, Strickland has to cope with the continued meddling of Sen. George Voinovich (R-OH), who seems to believe he still occupies the governor's mansion, too. Governors hate it when the congressional delegation bigfoots them on intra-state affairs. Such a clash led to a permanent rift between fellow Republicans then-Gov. Kenny Guinn and then-Rep. Jim Gibbons.

Strickland, meanwhile, is poring over the court's ruling in search of loopholes that might allow Class II gaming to go on line in December. It's that or cut $852 million from the state budget. If he can insinuate VLTs into horse tracks by May, then voters have a few months to get habituated to them before the 2010 vote.

For Harrah's Entertainment, the good news is that the court's ruling temporarily shaves $47 million off the sale price of Thistledown Park (the full $89 million tab is contingent on racino conversion). For seller Magna Entertainment, the bad news is that the deal may fall through entirely if Harrah's doesn't want to gamble on the outcome of further legal challenges and the tender mercies of the electorate.

Salvation for the Trop? Definitely!

Wed, 16 Sep 2009 17:09:00 -0700

From our Today's News pages: "As part of the fruits of its $125 million property-wide renovation, Tropicana Las Vegas today announced it's to open two new restaurants: Havana Go Go Cafe is a breakfast joint/cafe open daily at 7 a.m. Menu items include Cuban bread pizza, paninis, deli-style sandwiches, soups, salads, bagels, muffins and a range of specialty coffees and will debut shortly in the Island Tower soon. Bacio Pasta & Vino is an Italian bistro that debuted today and will be open daily from 11 a.m. to 10 p.m."

Talk is cheap but Alex Yemenidjian is quickly establishing that he means what he says. Now if he can get that balky Wayne Newton contract settled, he'll have a proper headliner for the joint. It's cheering to see some of the entrepreneurial spirit that made Las Vegas great but which has lately been smothered by a Wall Street-driven mania for competition-killing mergers and acquisitions.

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."

The real 'death panels'

Mon, 14 Sep 2009 16:10:00 -0700

They're here and they're called HMOs. And business is booming. Since I need to spend the afternoon tinkering with new S&G format, here's a digression into the world of "maximizing shareholder value" -- which has had a different sort of baneful effect (but a considerably less malignant one) in the gaming industry.

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.

"Viva Elvis"

Wed, 02 Sep 2009 01:38:00 -0700

Obssessed? Moi?

Yes, Viva Elvis will be the long-awaited, enshrouded-in-secrecy title of the Cirque du Soleil show scheduled to debut this December at CityCenter.* Wow, they must have had to really burn the midnight oil in Montreal to come up with that one ... Speaking of name changes, Scarlett and her Seductive Ladies of Magic (at the Riviera) is now Abra-Ca-Sexy. Well, it's catchier ... The wheels continue to fall off the Riviera train: An Evening with Dean and Friends has closed, as has the dinner buffet (again) ... Lost in the bankruptcy tumult at the Greek Isles was the opening of a new show. Its cumbersome title is Chinaman: A Rock & Roll Comedy Experience. Moving right along ... By the time you read this, Rockstar: The Tribute should have reopened at the Harmon Theater after a disastrously short stint at the Wyrick Entertainment Complex (aka, "the Venue of Death") in Planet Hollywood. However, the Harmon has given it as much advance publicity as an IRS raid on a Vegas nightclub, so that's not a promising start ... In like manner, Beatles tribute Penny Lane tiptoed into the Tropicana without so much as a 'by your leave' ... Back at Planet Ho, Tony 'n Tina's Wedding evidently isn't performing up to expectations. Ticket prices have been reduced 13%-30%, although they're still steep ($63-$143) ... It looks like Deutsche Bank is going to wait a spell and open the Cosmopolitan in Sept.-Oct. 2010. Which, given that the Strip's been strangling on a glut of high-end rooms, is probably the wisest course of action. Wall Street's former Holy Grail, "another wave of megaresort openings," has become a phrase to be dreaded.

Ready for some good news? The most remarkable dancer of the late, lamented Sin City Kitties, Koree Kurkowski, is now part of the ensemble of Bite. The show is kitsch to the nth degree but it's entertaining in its own so-bad-it's-good fashion. The Stratosphere casino floor was pretty dead for a Friday night last weekend, but Bite was definitely packing them in. It's not as good as Sin City Bad Girls (at the Las Vegas Hilton) but way better than forgettable X Burlesque (at the Flamingo).

* -- the Viva Elvis revelation was let slip during last weekend's Michael Jackson festival at The Palms. I learned of it after being invited -- on 75 minutes' notice -- to co-host an episode of Steve Friess' The Strip Podcast, in which I am teased for being "obsessed" with Carmen Electra. I'll link to the edited version once it's available, so you can hear me date myself with a Barbi Benton shout-out.

This isn't Photoshop but an ad clipped from a Michigan newspaper, I kid you not:

The things you can find at the grocery store these days ...

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.

Reality check

Tue, 18 Aug 2009 20:10:00 -0700

It's sackcloth-and-ashes time at the Las Vegas Review-Journal, which ran another "The end is nigh" story about falling gambling revenues. (The Aliante Station Effect appears to have petered out in North Las Vegas.)

Yes, we're all the way down, down, down ... to 2004 levels. If we take the Wayback Machine five years into the past, we find the Nevada Gaming Control Board reporting a 6% increase in revenue from June 2003. And June '04 was an "off" month for a year that was distinguished by double-digit growth in casino revenue.

Aliante Station: played out?

That same August, the cost of the MGM Mirage takeover of Mandalay Resort Group inched past the $8 billion mark. "[B]ut Wall Street analysts ... said the merger still makes sense for investors and the combined company," wrote the R-J's Rod Smith. Weeks earlier, regulators signed off on the $1.3 billion Boyd Gaming/Coast Casinos merger; Station Casinos, Las Vegas Sands and MGM were all recording record-setting financial performances, and Harrah's Entertainment was girding itself for the conquest of Caesars Entertainment. Heck, the industry was feeling sufficiently bullish to absorb a 0.5% hike in the privilege tax. Read one headline, "State gaming revenue on a roll."

Had the industry lived within its means, today's narrative would be quite different. The Las Vegas Sun helpfully charts the inflation and collapse of the casino bubble, which lasted a good three years, peaking in October '07.

Unfortunately, when what went up eventually had to come down, some companies discovered themselves overexposed and with no margin for error. The likeliest victims, though, are the marginal, standalone properties which might find themselves squeezed out of existence as aggressive discounting by MGM and Harrah's brings quality Strip hotel rooms into the "affordable" realm (Or, as Phil Satre puts it, when the A-level product is priced below the B-level product.)

Valuable perspective is to be had by reading (or watching) this roundtable discussion with three men who dominated much of the gaming industry in the Nineties and early into the new century. Ex-Harrah's CEO Satre has earned the right to be a Monday morning QB. After all, he never did anything so stupid as strapping $30 billion in debt onto his company's back.

Former Station CFO Glenn Christenson seems deeply in denial at many points, though even he concedes, "It wasn’t so long ago that we hated conventions as an industry and now it’s critical to our operations. We’re severely damaged by that loss." But ex-Boyd prexy Don Snyder nails it when he describes "a false sense of security" pervading the industry, adding "I think we all got caught up in that."

2004, meet 2009, where "up" is the new "down."

Senator Sue?

Wed, 12 Aug 2009 21:49:00 -0700

Why should Nevada have only one former casino executive in the U.S. Senate when it could have two? Sen. John Ensign (R-Nevada Landing) might soon be keeping company with Sen. Sue Lowden (R-Santa Fe Gaming Corp.), if a poll commissioned by Lowden supporters is in any way indicative. Lowden, an ex-legislator who was drop-kicked by her constituents in '96, was co-owner of the Santa Fe Hotel until it was sold to Station Casinos in 2000. Station then did to the pro-union workforce what the Lowdens could not: sacked every last one of them. Business suffered afterward (customers didn't appreciate the disappearance of familiar faces) but Station has always liked to live dangerously.

Lowden currently sits on the board of Archon Corp., proud owner of the Pioneer Hotel in Laughlin, as well as of the Wet 'n Wild remnants that almost became the site of James Packer's Crown Las Vegas. Archon has a habit of turning up in the newspapers every now and again, sometimes when investors get riled up about dubious, insider-friendly stock moves. Sen. Harry Reid (D-NV) may not even have to unpack his heavy artillery; the Culinary Union will be only too happy to unleash its attack dogs on Lowden ... again.

Quote of the Day

Fri, 07 Aug 2009 18:37:00 -0700

"There is a very surreal question here: Is it intelligent to ruthlessly grind every last dime out of this place when it involves dislocating groups of your employees? Oh yes, the quarter looks better and you have one of these fancy phone calls. But is that good business? I think not." -- Steve Wynn, during Wynn Resorts' 2Q09 earnings call.

Casino wars in Macao

Fri, 07 Aug 2009 16:25:00 -0700

Bloomberg's interview with Credit Suisse's Steven Chan is now online and is must-see TV:

Case Bets: Ohio, Trump, Fahrenkopfian outrage

Thu, 06 Aug 2009 18:33:00 -0700

With racinos a done deal in Ohio, a suddenly frisky Harrah's Entertainment is shopping around for a Cleveland-area track. If anything, I'm surprised competing companies haven't beaten Harrah's to the punch, but it seems to have sucker-punched its rivals. Good on it.

Donald Trump's fire-sale acquisition of Trump Entertainment Resorts is far from a done deal, according to the Wall Street Journal. Bondholders who stand to have $1.25 billion flushed away in the Trump/Mark Juliano sweetheart transaction may be able to throw in a spanner in the works.

Casinos spread the wealth -- or do they? A Journal of Economic Studies report queries the premise, saying casino expansion dilutes local wage bases. However, casino companies -- and some academic allies -- aren't taking this lying down. Both Penn National and Cordish Gaming are making vigorous arguments to the contrary, as is one Frank J. Fahrenkopf.

Adelson bombing in Pennsylvania; RoboPoker returns; Dissent over Wynn

Thu, 06 Aug 2009 17:26:00 -0700

Both the opening of Sands Bethlehem, and recent expansions of Meadows Racetrack & Casino (+29%) and Mohegan Sun at Pocono Downs (+21%) drove an 18.5% increase in slot revenue this July. With $19.6 million in gross revenue, Sands was only good for fifth place, barely behind Mohegan Sun ($19.8 million).

Adelson's new slot parlor was well off the pace set by Philadelphia Park Casino & Racetrack ($30.8 million) and The Meadows ($29.9 million). Harrah's Chester didn't perform too shabbily, either, pulling in $27.3 million from the one-armed bandits. Both it and Philadelphia Park were less than 2% down from their July '08 revenues, putting paid to the theory that Sands Bethlehem would draw -- at least in any significant degree -- from the Philadelphia area. Only nearby Mt. Airy Resort & Casino is taking a serious hit.

Downtown Reno's nicest casino, the spacious Silver Legacy, is taking a big step downmarket by succumbing to the cheesy allure of RoboPoker. Even that bit of good news for PokerTek wasn't enough to keep Aristocrat Leisure from writing down its share of the company.

Steve Wynn is The Man, at least in Macao, according to the controversial Jim Cramer. I agree.

Why then, is Wynn Resorts COO Marc Schorr cashing out at a time when the stock is arguably undervalued? Maybe he's just one more American who got overextended in the go-go Bush Era.

Quote of the Day

Thu, 06 Aug 2009 16:11:00 -0700

"A pox on you, David McKee! I bought 450 shares of Riviera Holdings at 48 cents yesterday, knowing all was well with the world. Today, it is already down to 42 cents. Over 10%! In one day!! I am convinced the surging popularity of your blog, along with your [Question of the Day] answer questioning the future of the Riv, have had a chilling effect on the investment community. Curses, foiled again!!!" -- S&G reader Jeff Leatherock.

Quote of the Day

Wed, 05 Aug 2009 17:58:00 -0700

"CityCenter is new hotel capacity that the market needs like a hole in the head." -- J.P. Morgan analyst Joseph Greff, on MGM Mirage's 2Q09 report.

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?

Donald Trump, comedian

Tue, 04 Aug 2009 12:54:00 -0700

This is a joke, right? Three Atlantic City casinos for a slim $100 million? Then again, if Trump Entertainment Resorts financial advisor Lazard only values unloved Trump Marina at $24 million, maybe exiled chairman Donald Trump isn't so far out of the ballpark after all. What's even more surprising than the measliness of Trump's offer is the alacrity with which CEO Mark Juliano capitulated.

"My daughter Ivanka and I will work tirelessly to make this company great again," pronounced The Donald, displaying yet again his peerless ability to deliver drop-dead laugh lines with a perfect deadpan. He added, "As I have done in the past, we will make Atlantic City hot once more."

If anybody's going to make Atlantic City "hot," Donald Trump it's not -- especially since he's still scheming to get a piece of the Philadelphia slot-parlor action. For those of you waiting until 2020 to redeem your Trump Entertainment debt, the good news is that you'll (eventually) get 94 cents on the dollar. Holders of secured notes due in 2015 get wiped out, along with unsecured creditors. As usual, Trump gets the gold mine, the financiers get the shaft.

But the real winner is MyFox.com, which perhaps unwittingly filed this story under the perfect headline: "Cash for Clunkers."

McKee vs. Lerner

Mon, 03 Aug 2009 20:01:00 -0700

Actually, the headline misstates what was a very collegial -- if occasionally dissenting -- exchange of views between Union Gaming Group's Bill Lerner and Yr. Humble Blogger on Jon Ralston's Face to Face show. It was only my second-ever gig as a talking head -- and it shows. (Note to self: Consider Botox injections to paralyze overactive facial muscles.)

The ostensible subject of discussion was newly bankrupt Station Casinos, but it ranged as far afield as Singapore and Macao. Actually, we probably could have taped an entire week's worth of shows without exhausting the topic(s).

Lerner was a perfect gentleman, despite all the snarky things I've written about him in S&G (assuming he even reads it, which I doubt). I could certainly learn a thing or two from his poised on-air demeanor. I also found that, if you're in the middle seat on Face to Face, you need to "cheat" a little to your right and downstage or else you'll be masked in all the wide shots. And, as Ira David Sternberg taught me, don't ever look at the camera.

My ex cathedra pronouncements were, however, overshadowed by my alarmingly jowly appearance. When the video is posted, you will see that I look every one of my 200 lbs. -- and quite a few more! Since the episode isn't available on the Las Vegas Sun Web site yet, here's a preview:

Oh, my brain and mouth parted company on at least one occasion. I thought I said MGM Mirage would probably offload The Mirage for "one and a half billion to two billion dollars." What emerged, though, was "a half-billion to two billion dollars." So Jim Murren, wherever you are, I do not think you'd part with The Mirage for a (comparatively) measly $500 million ... just so we're good on that.

At least the high-angle shot at the end missed my bald spot. Thank God for small favors. The rebroadcast is starting; time to find out if I still know how to operate a VCR.

Douchebags on parade

Mon, 03 Aug 2009 16:06:00 -0700

With a crowd like this ...

... is it any wonder that The Rio's Sapphire Pool became a PR catastrophe (complete with rogues' gallery)?

Too bad that Bloomberg News doesn't permit its video reports to be embedded. Credit Suisse analyst Gabriel Chan gives an interesting, fact-packed report on Macao. It's a somewhat long interview segment, but stay with it because the good stuff comes near the end. That's where Chan explains why Stanley Ho is able to build a new casino for only $200 million and how come the much-hyped relaxation of visa restrictions is still at least four months away.

Case Bets: Hard Rock, Puck, Station, Greek Isles

Wed, 29 Jul 2009 18:55:00 -0700

Morgans Hotel Group has never seemed able to make up its mind about what to do with the Hard Rock Hotel & Casino (one of the stranger acquisitions of recent years). Then-CEO Ed Scheetz came in talking big about classing the place up and raising ADRs. Fast-forward to '09 and the HRH is staking everything on its skanky Rehab parties (does the staff have to don hazmat suits when cleaning up afterwards?) and going for the mid-price market midweek.

One can't fault the latter half of that strategy, especially if you're in an off-Strip location and could use the traffic. However, if Morgans goal was to increase Hard Rock ADRs, perhaps it shouldn't have embarked on a ginormous expansion that practically obliterates Peter Morton's original hotel and dilutes the asking price per room. Also, I don't know whether to praise Morgans for doing the impossible and completing (sort of) its Paradise Tower well ahead of schedule ... or criticize it for being in such a hurry to churn some EBITDA that it's opening it in an unfinished state.

But here's hoping the business model works. The HRH is one of the few places in town that's hiring, not downsizing. At lot of people's jobs are riding on its success.

One less Wolfgang Puck restaurant on the Strip? That's hardly a culinary tragedy, given that he's still got -- what? -- five other places in town and has become the Ronald McDonald of haute cuisine. A laughable poster in McCarran International Airport uses Puck's visage to push the message, "Less celebrity, more chef." Uh, better put that the other way 'round.

The real tragedy here (aside from the loss of jobs) is the temporary demise of Poetry, one of the few venues in town to cater to an upscale African-American clientele. Harrah's Entertainment and the Forum Shops went out of their way to put the dagger in Poetry. Now they congratulate themselves on a job well done. Thanks for nothing, fellas.

Bondholders finally lost patience with Station Casinos, tripping the bankruptcy lever. Interestingly, all Station casinos (small "c") are shielded -- which implies that it's Station's imperial expansion plans which are are shot and that its considerable real estate holdings could be up for grabs. It looks like über-resort Viva, long-suffering Durango Station, Losee Station and umpteen other projects are kaput.

Too bad for Station partner Colony Capital; if the latter goes forward with its Neverland Ranch tourist-trap plans, it may have to disassemble the old Michael Jackson Xanadu and relocate it, lock, stock and menagerie. And what does/did Station have in abundance? Raw land. It was a marriage made in businss heaven but it surely won't reach the altar now.

Speaking of suffering, what's back on the auction block but the Greek Isles, which is $23 million underwater. Even at a revised valuation of $44 million, isn't that far too much to ask for this unremittingly unsuccessful property, the second coming of the Castaways? Perhaps it's time to exorcise this ghost which haunts the dead zone that is Convention Center Drive.

Strange happenings at Penn Nat'l, Harrah's

Wed, 29 Jul 2009 18:31:00 -0700

While everybody's been focusing on the implosion of Station Casinos, the analysts at J.P. Morgan snuck out one of the more unusual (and entertaining) reports I've ever come across. They pored over Penn's 2Q09 filing and had some tales to tell.

The lead was that Penn was falling short of its cash-flow targets for the quarter. That musn't have been a complete surprise, given the incapacitation of Empress Joliet and the swapping out of one Lawrenceburg riverboat for another. However, there was trouble in River City, with Morgan analysts noting "an unexpected spike in large employee medical catastrophic claims at that [Lawrenceburg] property (bizarre), and 4) a less than productive new marketing program at Charlestown (marketing at Charlestown?) that did not produce incremental revs, but increased costs." The medical claims alone were a $1 million black eye.

They counseled against heading for the lifeboats, though, and pointed out that Penn has $795 million in cash in the till. (Do I hear an offer for Beau Rivage?) Morgan is also bullish on Penn's expansion prospects in Kansas (really?), Ohio and Maryland.

There was even some good news for competitor Ameristar Casinos, thanks to continued troubles at Harrah's Entertainment. Wrote the Morgans team: "Harrah's has not increased its promotional activity (comps, spending, reinvestment)," boding well for everyone else.

As Morgan reported earlier this month, Harrah's was -18% in Louisiana in June, by far the worst decline of any operator in the market -- while Boyd Gaming notched a slight gain (but a major victory in that context). Just as I've expected from the start, Texas Pacific and Apollo (Mis)Management are nickel-and-diming Harrah's into the poorhouse.

Quote of the Day

Wed, 22 Jul 2009 12:59:00 -0700

“Wynn is simply much cleaner, safer and a smarter play [than Las Vegas Sands] on gambling in Macau.” -- CNBC Mad Money host Jim Cramer, warming toward potential Wynn Resorts and Sands IPOs on the Hong Kong stock market. What's not to like about Wynn when you consider its uncanny streak of luck in Macanese baccarat play?

"Link" to Nowhere

Tue, 21 Jul 2009 13:49:00 -0700

On and off, over a four-year period, Harrah's Entertainment teased journalists (and, by extension, the public) with hints of a really big project to be announced really soon ... whenever they got around to it, that is. Well, the Harrah's mountain hath labored and produced ... a mouse.

"Project Link" isn't without virtues, even if they're largely negative ones. It isn't another high-end, multi-billion-dollar megaresort. It's not a budget-buster, period. It's not über-expensive food and retail. And it does entail giving modest facelifts to a couple of Harrah's tattier Strip properties: O'Shea's would lose its faux-Dublin façade and the Imperial Palace's Strip frontage (and pagoda roof) would be supplanted with what appear to be enormous LED screens.

It also acknowledges what's long been one of the problems of Harrah's consolidation of the east side of the Strip into one ginormous province. Namely, that to redevelop it in any significant way would involve taking one or more of a string of multi-story cash registers out of business. True, you could start from the back, maybe knock down the IP first, but at some point push comes to shove and a major cash-flow-producing Strip casino (most likely Harrah's Las Vegas) would have to give way. In a sense, the real estate was already too lucrative to be redeveloped.

Arrival at this plan involved acknowledging certain factors that should have been obvious long before CEO Gary Loveman went on a buying spree. For instance, that MGM Mirage/Wynn Resorts-scale megaresorts are a low-ROI proposition. Or that such a creation might impinge on business at ever-growing Caesars Palace. (It never ceases to amaze me that Harrah's spends hundreds of thousands of dollars to determine what, say, Hunter Hillegas could tell them for free.)

Of course, any new resort built in Lovemanville wouldn't have to be high-end/low-return. That's just the industry group-think of our day; that you "justify" the land's cost by superimposing a hella expensive megaresort atop it, then justify that outlay by charging prices that relatively few can afford.

The notion of luring pedestrians off the Strip and down a multi-dogleg side street is an untested notion. Give Harrah's points for thinking outside the box here. It'll mean getting Vegas visitors to break ingrained habits but it could eventually stimulate further off-Strip development.

For all I know, it could be Gary Loveman's longstanding fantasy to own a 600-foot Ferris wheel with an (at least) 200-foot "HARRAH'S" logo lighting up the night sky. But do I believe this is what he had in mind when he supervised the purchase of vast tracts of Koval Lane real estate at top dollar? Not for a moment. Especially not when you consider he's been sweeping it clean of low-rise housing developments that might otherwise have been of income-producing use.

Now, like Gershwin's Porgy, he's got plenty of nuhtin' and nuthin's plenty for him. His projected Ferris wheel will be sitting (as you can see from the rendering) smack in the middle of a wasteland, a void, a whole lotta nowhere. At least the circus can pitch its tents there the next time it comes to town.

It's harder still to believe that this (mini-)master plan was concocted two years ago and kept under wraps until now ... unless it was a before-the-fact, low-budget, "Well, we've got to do something" concession to the development-crippling effect of the LBO. Even so, secrets just aren't that well kept in this town.

Then again, it often seems if Loveman himself does not know what Loveman has in mind. Take for instance, his recent contention that building a Strip megaresort was too big a risk for Harrah's. Not compared to taking on $24 billion in LBO debt it wasn't. And you could build a megaresort and a half for the $5 billion in company value Loveman recently wrote off.

The biggest threat to Project Link may be Loveman -- or rather his short-attention-span style of leadership. While some cunning master plan may be apparent to his inner circle, the leitmotif of Loveman's tenure as CEO has been to jitterbug spastically from one short-lived initiative to another.

Having gotten right up to the threshhold of having to decide what to do with Lovemanville, his trigger finger grew weak. He pulled a U-turn and flung Harrah's into the arms of Texas Pacific Group and Apollo Management, a move with disastrous consequences. (Especially for the consumer, as TPG/Apollo's plan was to gut the company all along.) At least it had the short-term benefit of sparing beloved local institution Battista's Hole in the Wall from Loveman's bulldozers. As with his jihad against revenue-participation games like Wheel of Fortune, Loveman often seems oblivious or (far more likely) indifferent to what customers like or want.

In the two years or so it will require for Project Link to obtain startup capital, the odds are considerably better than 50-50 that Loveman will have lost interest and moved on to something else. If he doesn't, it would be a very pleasant surprise.

The dream is dying

Mon, 20 Jul 2009 16:07:00 -0700

Just last week, UNLV's historical sage, Dr. Eugene Moehring, was taking a dim view of the fate of Las Vegas' working class. Now comes the Wall Street Journal to back him up with some sobering reportage.

Even at union salaries, Culinary Union-represented employees are hardly living on Easy Street. According to the WSJ's Tamara Audi, a hotel maid can expect to make slightly under $30K/year. She also finds a fry cook who was pulling in $36K annually, before he was laid off. (He's now making much less at union-free M Resort.) This goes to show not only the importance of union representation but also how close many of these people are to the economic precipice.

Many of the causes of our current plight (like real estate speculation) are outside my remit. However, a great deal of the blame falls upon casino CEOs who -- encouraged by banks that pushed too-easy credit like "happy dust" and by cheerleading Wall Street analysts -- succumbed severally and variously to a collective psychosis.

The Plaza: Rooms available, starting the 12th of Never.

The hyper-optimistic mentality that produced a rapid-fire succession of (in no particular order) CityCenter, Cosmopolitan, Fontainebleau, Echelon, Palazzo, Encore, the Hard Rock Hotel acquisition/expansion, and even will o' the wisps like Crown Las Vegas and Viva, rested upon a bizarre assumption. Namely, that the Las Vegas Strip could not only absord literally thousands upon thousands of new rooms (preponderantly at the high end) but could do in a compressed time frame.

A few companies even thought this could be done even after they'd glutted themselves with LBO debt. (True, Harrah's Entertainment now says it never intended to go the metaresort route but the available evidence testifies otherwise.) As I've written before, a bubble was mistaken for a baseline, thereby magnifying the consequences when the economic fundamentals began to crumple.

Distance evidently lends clarity, at least to Harvey Perkins of East Coast-based Spectrum Gaming Group. He calls for a complete rethinking of the luxury-based Vegas business model, repositioning the Strip's posh palaces slightly downmarket. It'll mean eating a lot of pride but what alternatives are there?

It's a glass half-full perspective, which is preferable to the overdose of gloom quaffed by MGM Mirage CEO Jim Murren. He darkly prophesies, "There won't be another property built in Las Vegas for a decade."

Just wait 'til the next economic upturn and see if Murren is still saying kaddish. There will be new casinos in Las Vegas before 2019, I'm fully confident -- but they'll be ones positioned around affordability and (hopefully) generating double-digit ROI. Because, frankly, Las Vegas isn't the investment it used to be.

The St(ump) Regis, as it was to have been.

Then there's the schizoid-sounding Sheldon Adelson, who harrumphs, "I don't see any opportunities for any development in Las Vegas." Emphasis added; the Las Vegas Sands CEO seems to swing from bullish to bearish by the day.) It'd be nice for Sands if Adelson had been vouchsafed this insight before he started work on the St(ump) Regis in the midst of a condo-market meltdown. Now it's big bloody nose right betwixt the eyes of the Venetian and Palazzo.

The polar opposite of Adelson is Culinary Union boss D. Taylor who sounds like a flack for the Las Vegas Convention & Visitors Authority, so giddy is his optimism. Hey, D., have you talked to your workforce lately -- you know, the ones who just had to defer a $710/year pay bump?

At least some amusement is to be had from the Strip map prepared for the WSJ by Bill Lerner's new outfit, Union Gaming Research:

I don't think I'd take investment advice from a firm that doesn't know the correct spellings of "Echelon" or "Caesars." City Center seems to fallen off the map entirely. It'd also take issue with the classification of many sites (like the in-foreclosure FX Real Estate plot) as "ceased or delayed" as there was never any work to cease or delay at, say Elad Properties' "Plaza" site or Crown Las Vegas (aka "Archon"). Ditto MGM/Kerzner, Africa Israel, etc. However, the Cosmo, which really is in limbo, doesn't make onto the map.

At any rate, as land prices on the Strip continue to return to earth, there's going to be plenty of prospective acreage for the company that's ready, willing and able to build a mid-market casino on the Strip.

Case Bets: M Resort, bad debt, Wall Street's bomb

Mon, 20 Jul 2009 14:26:00 -0700

After fairly flying out of the gate, M Resort has hit the wall. Unfortunately, CEO Anthony Marnell III's response to economic adversity has been to sweat the value propositions. Not only is M fretting about card counters (hands down, the silliest preoccupation in the casino industry), it's yanking full-pay video poker machines.

“We are in business to have an edge and these games are nearly break-even,” Marnell tells Liz Benston. Give him points for candor ... but if you didn't want players to have a 50-50 shot, you should never have installed the machines in the first place, fella. This reeks of bait-and-switch. The video poker community is tightly knit; word of this stuff gets arounds fast and will undoubtedly redound to Marnell's disadvantage.

Another thing that might be working against Marnell are M's distinctly underwhelming coupon offers -- far inferior to those from Station Casinos, for one. The Significant Other and I tend to forward our M "offers" straight into the WPB (waste paper basket). I'd also respectfully dissent with Benston re M's casino design: It's a throwback to the old "disorientation" days. For ease of navigation, M's not a patch on Eastside Cannery, to say nothing of Wynn Las Vegas. Heck, even the venerable Sahara isn't the rat maze that is M's gambling floor.

When "whales" attack. Indicted high roller Terrance K. Watanabe is taking on Nevada's casino-debt-collection machine and his lawyer is making some interesting legal arguments. Basically, he's contending that markers are loans, not checks (as longstanding Nevada precedent would have it). Should this argument prevail at trial, it could have far-reaching consequences.

Since markers could no longer be booked as income, Nevada would no longer be able to tax uncollected markers, as it currently does. Since enforcement of the debt is funded by assessing a 10% penalty on the debtor, Clark County couldn't afford to go after delinquent whales, either. And casinos themselves might have to think even harder before (in effect) lending money to players like Watanabe who, his attorney says, accounted for a fifth of The Rio's and Caesars Palace's casino revenue in a two-year period.

Hoist on its petard. In his latest Las Vegas Business Press column, Dr. David G. Schwartz explains how the consolidation mania of the 1990s (spurred by manic Wall Street analysts) came back to bite the casino industry in its ass when times were tough. So tell us, Nevada Gaming Commission, why was it such a good idea to have an oligopoly on the Strip (and in Lake Tahoe ... and ... )?

Quote of the Day

Tue, 14 Jul 2009 20:38:00 -0700

“Did these companies come in and make Harrah’s and Station better companies? Not really. In the case of Harrah’s, they have made things worse.” -- T. Rowe Price portfolio manager Joe Fath on the effects of private equity buyouts on the casino industry.

Vegas needs Carmen Electra

Tue, 14 Jul 2009 11:10:00 -0700

There's a sentence I never thought I'd live to type. But after seeing Ms. Electra bumping and grinding, and generally giving her all to a pair of solo turns in MGM Grand's otherwise fembot-oriented La Femme aka Crazy Horse Paris ~~Crazy Girls~~, this woman definitely deserves a modest venue where she can bring the raunch to the Strip on a regular basis. True, her routines were not always spot-on and her dirigible-size funbags could use some deflation (although we're not quite in the Holly Madison league of grotesquerie). But she's got animal magnetism that would have been wasted as Mel B.'s sidekick or Hans Klok's beard.

As The Sun chronicled: "Carmen's naked antics make MEL B's appearance in rival Vegas burlesque revue, Peepshow, look tame in comparison."

That they did.

Wynn degraded. Analysts at J.P. Morgan are downplaying their expectations for Wynn Resorts, particularly in Macao. There, Morgan has shaved $11 million off its cash flow projections for 2Q09. Slipping REVPAR (if -28% is a "slip"), low slot handle and "flat table volumes" are blamed.

On the Strip, Morgan only expects minor softness (to the tune of -$4 million) in Wynncore business. Cash flow projections for next year have been trimmed by $9 million in Vegas and $30 million, as the analysts have modest expectations of Encore Macau. The Morgan analysands remain bullish on Las Vegas Sands, though. Somewhere, Sheldon Adelson is having a moment of gless.

Moulin Rouge: Whoops!

Tue, 07 Jul 2009 14:27:00 -0700

The Moulin Rouge development that will never be.

Oh dear, oh dear. Seems like the City of Las Vegas unwittingly obstructed its own arson probe into the demise of the Moulin Rouge when it allowed the property to be immediately demolished. Sloppily, the actual tearing-down was farmed out to the property's former owners, who happened to have a demolition contractor on site during the blaze.

The fire's cause remains speculative and no finding of arson has been made -- and now perhaps never will. But the city's decision not only looks overhasty, it was (at the very least) cavalier to entrust it to dispossessed Moulin Rouge Development Corp. and not new owner Olympic Coast Development. The latter's prexy, John Hoss, told the Las Vegas Sun he found the chain of events "a little odd" and "a weird coincidence." Since Hoss is only trying to corral a $100,000 insurance claim, the city could get stuck with an asbestos-removal tab as high as $1.1 million.

Can they screw this up any further? Is the Pope Catholic?

F'bleau-minus. The bankrupt resort's developer, Jeffrey Soffer, proposes some unspecified corner-cutting to get the project back on budget. ("On budget" being a very relative term where Fontainebleau is concerned.) Combine this with the allegedly secret "Enhanced" costs for F'bleau's highly touted amenities and the moral of the story is that what you see on the Web site or in the design renderings has a tenuous relationship to what you'll actually get.

At least Soffer is offering to chip in some equity, unlike former investor James Packer, who scuttled away from F'bleau the moment the chips were down.

Gator on the loose. One of Las Vegas' larger parks got a lot more interesting yesterday when a 42-inch-long alligator turned up. Instead of entrusting the spunky fellow to a local zoo or perhaps one of our local casino-based wildlife habitats, the Wildlife Dept. killed him. Bastards. I hope they never get their mitts on our beloved Mojo ...

Mojo, the monarch of Huntington Press.

Speaking of James Packer ... griefs are arriving in battalions (thanks, Mr. Shakespeare) for City of Dreams. In terms of mass-market business, Venetian Macao is eating City of Dreams' lunch. "Despite 41,000 people walking through City of Dreams every day since it opened in the first week of June, most of the visitors were just admiring the decor instead of sitting down at its tables for a game of baccarat," reports The Age.

Not only is one analyst projecting a 15% earnings shortfall for Melco Crown Entertainment, another has tripled his loss-per-share projection. J.P. Morgan is also revising its 2010 cash-flow projections on the $2.1 billion megaresort to 13% ROI, down from 17%. (That's still a better return on investment than you can get on the Las Vegas Strip.)

Did Steve Wynn take Packer to the cleaners when sold him 37% of a casino concession for $1 billion? Wynn had a chance to size up Packer and deemed him not yet ready for the big leagues. Score another one for El Steve.

Sandbagged at F'bleau

Sun, 05 Jul 2009 16:47:00 -0700

Bank of America has fired another salvo in the ongoing war of legal briefs involving bankrupt Fontainebleau. The latest B of A blast depicts F'bleau management as considerably less than candid with its lenders. Not only did the former allegedly stiff-arm the latter when meetings were requested, there was an episode that might be called the casino industry's version of an "October surprise."

According to page 18 of the court filing, last April 17, F'bleau sprang a double whammy on the bank. Supposedly, it had been budgeting upfront for a "Base" plan while keeping hidden an "Enhanced" plan that "included restaurants, retail, nightclubs, and pool deck gaming and bar area." Not only did F'bleau reveal that the "Base" budget was unfunded to the tune of $180 million, the "Enhanced" budget would tack on another $203 million.

What F'bleau told the bank -- but not the public -- was that it wanted to push back the opening until Feburary 2010. Its own estimates also showed that it would recoup only 60% ($35 million) of the projected LEED credits. In short, the bank is accusing F'bleau of merrily spending away even as it knew the numbers weren't going to add up.

Three days after the F'bleau surprise, the project was notified that it was in default. At that time, the megaresort was still $1.5 billion away from completion, a sum that couldn't be financed without ignoring existing loan covenants -- and one that included $300 million in change orders.

An appraisal ordered by B of A concluded that F'bleau -- which was on pace to cost $3.2 billion -- was worth only $1.76 billion. Even that figure may be optimistic, as it's predicated on F'bleau doing better-than-Strip-average numbers on the casino floor, especially at the tables, plus a 91% hotel occupancy rate.

The project also stands accused of asking to be simply forgiven over $1.3 billion in existing debt. That's more than the cost (in unadjusted dollars) of either Bellagio or Mandalay Bay and roughly equivalent to that of the new Aladdin (now Planet Hollywood). You or I could build quite a dandy casino-resort, too, if we were allowed to pay for it in Monopoly money.

Of course, if one pretended that aforesaid $1.3 billion in costs had simply ceased to exist, it would soften some gloomy ROI projections. According to the Las Vegas Sun, F'bleau's own number-crunchers found that, after two years of operation, the resort would generate $162 million-$252 million in cash flow. So we'd be looking at a 5%-8% return on investment on a $3.2 billion megaresort (the unspoken implication being that would come after two even leaner years at the start). We can have megabudget megaresorts on the Strip or high-yield Vegas casinos but we clearly can no longer have both.

S&M at Station

Thu, 25 Jun 2009 14:35:00 -0700

Bondholders of Station Casinos must have an infinite capacity for suffering. Either that or CEO Frank Fertitta III is such a virtuosic Pied Piper that they'll follow him anywhere. It's difficult to rationally explain why they're letting a superior offer from Boyd Gaming collect dust, opting instead for the umpteenth forbearance in six months.

Among the drawbacks to the "prepackaged bankruptcy" that Station is languidly pursuing are that it would leave current Station leadership in place, to say nothing of its enablers at Colony Capital. Also, once Colony's share of the promised $244 million in new equity is subtracted, what the Fertitta clan kicks in is likely to be chicken feed -- at least when compared to the half-billion clams various and sundry family members took out of the company during its catastrophic LBO.

S&G never, ever advocates violence ... but if Station's debtors are getting antsy, we'd completely understand if they took a cue from the Stewie Griffin collection method:

For "fake moustaches," mentally substitute "dog tracks in Massachusetts."

F'bleau: 'But who would want it?'

Tue, 23 Jun 2009 20:11:00 -0700

No sooner had I -- perhaps foolishly -- posed that question than the Las Vegas Review-Journal answered it. Top dogs from both Wynn Resorts and Harrah's Entertainment had been given tours of Fontainebleau, as had sundry other potential investors.

You've got to wonder how this news is playing with two constituencies: Harrah's bondholders and Wynn employees. Both have been poor-mouthed of late, with the latter absorbing severe pay and benefit cuts for the company's sake. As for Harrah's debtors, they're probably long since resigned to taking a bath on their investment, since the timeline for repayment already stretches far into the next decade. In other words, it's not the best moment to be seen out shopping.

Also, there's the small matter of cost. F'bleau's official budget has now crept up to $3.1 billion and -- if its bankers are right -- the completion money needed is close to $1 billion. (Insert Dr. Evil inflection here.) Steve Wynn might have enough socked away to swing that. Gary Loveman, on the other hand, says his company doesn't even have enough scratch to change its letterhead to "Caesars Entertainment."

Theory: Perhaps Loveman's sugar daddies at TPG Capital and Apollo Management underwrite the completion of F'bleau, maybe more -- but as a separate entity. Harrah's is then jobbed in to run the joint. It'd mean some administrative headaches for Loveman but nothing compared to those involved with being the out-and-out owner. Personally, I'd give Wynn better odds of actually getting this Spruce Goose into the air, but it's liable to be a charity case, whoever inherits it.

There's another reason for Wynn and Harrah's to approach F'bleau as they would a live grenade: the morass of litigation that surrounds Big Bleau. The latest batch of lawsuits alleges diversion of funds. Any casino company riding to F'bleau's rescue is going to want to be well indemnified against being dragged into this nightmare. No, Turnberry West and Fontainebleau will surely have to sort this out themselves.

Out of danger: That's where MGM Mirage says it is, largely by dint of mortgaging several key properties. CEO Jim Murren, meanwhile, complains that offfers for MGM assets aren't "close to what we believe the values are worth. The multiples are low. It seems like the wrong time."

Damn that free market! S&G humbly suggests that the low multiples are a reflection of the parlous state of the industry. Seven times cash flow just ain't what it used to be. Agree about the "wrong time" thing, though. Few are buying and even fewer banks are lending, so it's a heckuva juncture to be peddling one's wares.

Ensign concubine unmasked! He two-timed his wife with her? Beauty comes in many forms, but I'm thinking "lox," not "fox." As for well-remunerated cuckold Doug Hampton, he looks big enough to clobber the Nevada senator. Instead, he wrote a whiny letter to Fox News.

Despite his primitive spelling, grammar and punctuation, Hampton parlayed his husband-of-mistress status into a high-ranking sinecure at Allegiant Air. The latter says Hampton's employment was based on "his credentials and experience" ... not his education. Still, I feel as though my B.A. in English ain't worth the sheepskin upon which it's printed.

As F'bleau turns ...

Fri, 19 Jun 2009 16:48:00 -0700

Fontainbleau's grisly zillion-grievance bankruptcy has been sent to mediation. (I don't envy the mediator.) In the process, F'bleau has obliquely confirmed lenders' accusations of cost overruns. F'bleau has a union-affiliated financier lined up to provide funding above and beyond the final $656 million that the $2.9 billion (and climbing) resort's bankers have withheld.

One possible instance of profligacy involves F'bleau's on-hold condo component. Then-CEO Glenn Schaeffer had a handsome preview center erected along the Strip and staffed it up. But ... no matter how much you might want an F'bleau condo they wouldn't sell you one. No, they'd just take your contact information and get back to you -- sometime. With such half-assed decisionmaking, no wonder F'bleau alienated its backers.

And now the lawsuits pile up and contractor Turnberry West is being accused of featherbedding. This project really needs a third-party rescurer, but who would want it?

Burton is back? That's what Mike Weatherford is reporting. Lance Burton, it is hinted, will be returning to his Monte Carlo gig on July 1. Why all the delay and mystery? If I had to guess (and I do), my hunch would be that MGM Mirage is angling for a bigger slice of the gate receipts.

Atlantic City Death Watch: This is particularly worrisome -- Pennsylvania Gov. Ed Rendell is opening the door to full Class III status for the Keystone State's slot parlors. Sensibly, Rendell advocates waiting and seeing until all of Pennsylvania's planned slot houses are up and running before upping the ante.

However, he's also giving legislators his tacit blessing to force the issue. His advocacy of expanded video poker in Pennsylvania isn't going to do besieged Atlantic City any favors, either.

Macao" rises again?

Wed, 17 Jun 2009 16:11:00 -0700

Block out the shopworn, mostly useless generalities coming from Las Vegas Sands and groove to Macao's scintillating casinos, recoil from its thick blanket of smog, and take some heart from Credit Suisse's prediction of an upturn in VIP play in the Chinese casino protectorate.

A contemporaneous Australian TV report -- which can't be embedded, alas -- was even more striking, especially in the stunning contrast between the sleek architectural beauty of Melco Crown International's new flagship, City of Dreams, and the fugliness of Sheldon Adelson's nearby monoliths. Cheers to Melco Crown for bringing a needed infusion of taste to the Cotai Strip™.

Loveman in denial

Mon, 15 Jun 2009 16:36:00 -0700

Harrah's Entertainment CEO Gary Loveman continues his media-availability tour. In today's installment, he grants an audience to the Las Vegas Business Press and insists that not only is everything as right as rain at Harrah's but that the LBO he steered the company into is really "an ability to focus on long-term viability and the health of the business." (Bond analysts remain skeptical.)

Despite bragging on the vast "resources and ... expertise" (like these?) of Apollo Management and TPG Capital, Loveman doesn't have any new strategems or projects to offer. The overwhelming consensus of stock analysts and customers nowadays is that Less = Less at a Harrah's-owned property. Meanwhile, the debtholders who bankrolled the buyout are asked to take haircut after haircut, and could be forgiven for thinking they've been played for suckers. Is anybody benefiting from this deal? Oh, I forgot.

One could go on but the story's mostly a rehash of old Loveman platitudes, plus another refrain of "We Love Macao." Harrah's management has been warbling that tune incessantly of late -- so much so that it sounds like an overt courtship of Pansy Ho, should she and MGM Mirage get a divorce.

The most newsworthy aspect of the story is the accompanying photo, in which the former Harvard prof appears to gotten a deep chestnut-brown dye job. If indeed that's the case, Loveman should ask for his money back: It's not only undignified, it's inept.

Gordie Brown goes down: If you think Loveman gets a bad review, you should read about the Golden Nugget's star attraction, who inhabits "a place where pop culture pressed 'pause' at about the time of 'Achy Breaky Heart,' Hootie & the Blowfish and Forrest Gump."

Then again, there must be people who groove to Hervé Villechaize jokes. Trouble is, they're all going to be down at the Riviera, watching Charo. And when you're described as a poor man's Danny Gans ... well, do the blows land any lower than that?

Great news for slot players: Seven more years of Clue and Battleship. Give Hasbro credit for knowing a good thing (in this case, its alliance with WMS Gaming) when it saw it. And, just because we can't say it enough, WMS' Star Trek machines are the cat's pajamas. Just for the record, you know.

Quote of the Day

Thu, 11 Jun 2009 13:56:00 -0700

“We do not believe it is reasonable to assume that because gaming demand declined along with the economy, it will return to pre-recession levels once the economy improves.” -- Deutsche Bank gaming analyst Andrew Zarnett.

Photo © Sparky Goldstein

Quote of the Day

Wed, 10 Jun 2009 11:45:00 -0700

"It is unfortunate that our lenders forced us to take this step. ... Our goal now is to secure funding to complete this world-class project and restructure our existing debt." -- Fontainebleau Chief Restructuring Officer Howard Karawan, on the project's June 9 bankruptcy filing.

"What Las Vegas Vacationer wants to stay in what looks like an 1970's IBM office tower? the kids will be in the back seat crying and screaming 'Please Dad, not there'." -- Las Vegas Sun reader rejco100. S&G usually doesn't reprint anonymous Internet comments but this one was too damn clever to overlook.

Reid rewarded, Trop rescued

Wed, 03 Jun 2009 15:47:00 -0700

... Sen. Harry Reid's (D-NV) efforts on behalf of the casino industry have not gone unrewarded. If you can follow this formatting garble, you'll see that his donors include not only Tim & Tom, late of the Golden Nugget, but also several reliably Republican casino CEOs.

Even the Fertitta Brothers have chipped in, which is the least they could do after the Senate Majority Leader shepherded a provision that incentivizes companies to buy back distressed debt ... which Station Casinos has in abundance. All of which means that Sharron Angle and any other GOP challenger will have to build up a war chest from other industries. The coffers of Big Gaming -- with possible exception of Sheldon Adelson's kitty -- are slamming shut. The industry has taken sides and put its money on Reid.

Yemenidjian is in the house. Pending the stamp of approval for the Nevada Gaming Commission, all systems are "go" for Alex Yemenidjian to take the reins of the Tropicana Las Vegas. The feeling at the Trop must be akin to that of a besieged garrison finally seeing a relief column marching its way.

The former MGM Grand boss is saying all the right things. His backer, Onex Corp., will invest $100 million (or more) in the property, which has suffered manifest neglect. Current operator Tropicana Entertainment's capex budget was fairly puny, symbolic of CEO Scott Butera's halfhearted commitment to the LV Trop.

Under Yemenidjian, the casino will be extended to encompass the ends of the two pedestrian bridges. Two new eateries and a nightclub are planned. No word yet about a new evening show (or about chasing the prostitutes, pimps and -- worst of all -- timeshare peddlers from the premises). But Yemenidjian has too much reputation at stake to simply continue the stagnation that has been the Trop's status quo for more years than I care to remember.

(Correction: Yemenidjian plans to lower the bridge, not raise the river. Which is to say that the pedestrian bridges will be extended to reach the casino, not the other way around.)

When Yemenidjian was (unsuccessfully) pitching an Illinois casino -- also backed by Onex -- his prospective management team included two Gulf Coast veterans: Joe Billhimer and Karen Sock, late of Hard Rock Biloxi and Harrah's Grand Biloxi, respectively. Both are heavy hitters and Sock, in particular, is overdue for a Vegas posting. Here's hoping Yemenidjian brings them here. Better late than never ... and the Trop needs some serious brainpower.

"We really mean it this time." Another day, another "Las Vegas Sands has the capital to restart the Cotai Strip™" story. Turns out it's the same old same-old. The prospect of asset sales, if not dead, isn't looking terribly hale. After all, who wants to buy a hotel in Macao if you must forefeit the casino action? Where's the fun in that (to say nothing of the money)?

Case Bets: Packer & Ho, Sands Bethlehem, MGM Mirage, Ameristar, Penn, Harrah's, etc.

Wed, 03 Jun 2009 14:40:00 -0700

• Smashing guitars -- but not over each other's noggins -- James Packer and Lawrence Ho christened City of Dreams. The younger Ho downplayed expectations of foot traffic, saying his $2.4 billion megaresort could get by on far fewer visitors than the nearby (and comparably expensive) Venetian Macao, which draws 70K visitors daily.

• After a record-setting opening, Sands Bethlehem fell into fourth place during last week's casino action in Pennsylvania. Not surprisingly, Philadelphia Park and Harrah's Chester led the state.

• Beau Rivage is safe. Although MGM Mirage was peddling several of its regional casinos, J.P. Morgan reports that "we have heard from some bidders that this process is close to dead, so we don’t expect to hear asset sales chatter in the near to medium term."

• While yours truly was critical of staffing cuts at Ameristar Casinos, they appear to be paying off. The company projects flat revenue comparisons in 2009 but better cash-flow margins, pegging the savings as $40 million-$48 million, annualized.

• When in doubt, Penn National Gaming falls back on what it knows: racinos. It's angling for the Laurel Park concession left on the table when Magna Entertainment collapsed. Both Penn and rival David Cordish appear to be trying to chisel a loophole into Maryland's slot-parlor law, which limits companies to one slot house apiece. Penn is already committed to Cecil County but wants Laurel Park ... as does Cordish, who has a pre-standing commitment to the Arundel Mills area. The latter project has run into serious opposition. Expect a nip-and-tuck fight for Laurel Park.

• Penn is evidently getting cold feet in Ohio, however.

• Casino expansion in Iowa will have to wait until 2010, at the earliest. This delay is a disguised blessing. The Hawkeye State market has been holding its own during the recession but the timing for diluting the market with four new casinos could scarcely be worse.

• If wishes were horses, Harrah's Entertainment would be galloping along the shores of the Yangtze River this very minute. Seriously, would you lend Harrah's more money? Would you give an alcoholic the keys to your wine cellar? Well, you might get the empties back so you could redeem the deposit on the bottle.

Inside the mind of Trump

Tue, 19 May 2009 16:14:00 -0700

It's a scary place. According to a story in Monday's Wall Street Journal, "world famous ... television personality" Donald Trump's net worth is determined subjectively. According to the Trumpster, "it goes up and down with markets and with attitudes and with feelings, even my own feeling."

So what if banks estimate that net worth to be, say, $788 million (to cite a 2005 Deutsche Bank determination)? If the scowling mogul feels that he's worth 10 times that amount, say, it must be so! All of this is according to a deposition that the WSJ managed to get hold of, part of a Trump lawsuit against the French publisher of a book which he blames for, among the other things, his failure to land a Philadelphia casino.

Trump is piqued by author and New York Times editor Timothy O'Brien's 2005 contention that his net worth was as low as $150 million. Reached on the golf course by WSJ reporters, Trump stuck by his deposition, which included the statement that "mental projections" stored in his noggin and never committed to paper were part of his valuation process. As of Sunday, the Value According to Trump was $5 billion -- plus at least $2 billion in implied brand value.

When testifying, Trump admitted to exaggerating the value of his properties, "Not beyond reason." He also considers the sub-licensing of his name to other condo developers "a form of ownership. I'd rather have this than own the building." He also believed himself to be half-owner (or more) of a project in which he actually only held a 30% stake because he was getting management fees, too.

The deposition also contained this exchange ...

Attorney: "Have you discounted in your mind for the risk that you won't sell [country club memberships] at the prices you are anticipating?"

The Donald: "I think I will, but it's possible I won't. But I think I will."

Perhaps the official Trump corporate motto should be, "I think I can, I think I can, I think I can ..."

The MGM/Pansy Ho verdict: It's in and it's bad

Tue, 19 May 2009 11:15:00 -0700

After nearly four years of investigation, the New Jersey Division of Gaming Enforcement has released its long-awaited "suitability" findings on MGM Mirage joint-venture partner Pansy Ho. As MGM itself reported to the SEC yesterday, "While the report itself is confidential, at the conclusion of the report, the DGE recommended, among other things, that: (i) the Company’s Macau joint venture partner be found to be unsuitable; (ii) the Company be directed to disengage itself from any business association with its Macau joint venture partner; (iii) the Company’s due diligence/compliance efforts be found to be deficient; and (iv) the New Jersey Commission hold a hearing to address the report."

The grinning ghost of MGM Grand Macau

While the reason for the DGE's disapproval isn't given, it's also not difficult to guess. When someone with the sleazy reputation of Stanley Ho has an interest in your casino -- by dint of loans to two of his daughters -- a jurisdiction that takes probity as seriously as New Jersey is unlikely to give its benediction.

Slightly further down in its SEC bulletin, MGM offers one of the most Pollyanna-ish statements of recent memory: "The Company does not believe that the report will have a material adverse effect on it."

Let's back up a second. The matter of Ms. Ho now goes to the New Jersey Casino Control Commission for adjudication. The NJCCC is not obligated to act on the DGE's findings. However, the last time it exercised such discretion, it was to override the DGE's recommended probation for Columbia Sussex in favor of kicking ColSux out of the Garden State forthwith.

So the likelihood is that MGM will be faced with a choice between liquidating its New Jersey holdings or its Macao ones. The latter include a 50% stake in Borgata (and Boyd Gaming can afford to buy its partner out), plus some undeveloped land, which will be a much tougher sell.

As for MGM Grand Macau, it would revert to the Ho family. MGM could still, in all probability, count on an ongoing stream of revenue by leasing out the brand name or even by negotiating a management contract for itself (although management is rumored to have been the casino's Achilles heel).

Unless the NJCCC grants clemency (in which case, MGM loses face but nothing more, as one analyst puts it), "material adverse effect" is inevitable. But there may be a silver lining for CEO Jim Murren. He was able to get debt-covenant violations waived in return for an accelerated repayment of the company's whopping debt load. The diñero from a Borgata or MGM Grand Macau sale would come in mighty handy as the company tries to de-leverage itself.

Walking (out) in Memphis. A 21-year veteran of the Harrah's Entertainment hierarchy resigned last week, another casualty of the company's downsizing.

And then there were 135. It used to be the execs jumping from the sinking Cosmopolitan ship reached for a lifeline from Fontainebleau. Now they'll be looking for another rescue vessel. (Hey, the Tropicana may be hiring soon.) A F'bleau spokesman says negotiations with Deutsche Bank are continuing, in a notable ratcheting-down of the bellicose rhetoric that's been lobbed to and from F'bleau of late.

Heard last night as part of an act at Sin City Comedy, re the Vegas Trop: "A $20 bill and all my teeth -- I'm a whale!" Conclusion: Alex Yemenidjian cannot arrive soon enough.

"Another one bites the dust"

Fri, 15 May 2009 11:15:00 -0700

That's how a reader informed me of Las Vegas-based Golden Gaming's decision to bail on Wyandotte County in Kansas. Considering that you've got Harrah's Entertainment, Ameristar Casinos, etc. firmly entrenched across the state line in Kansas City, Mo., and Isle of Capri making a comeback over there, I don't blame Golden for its hesitation.

Penn National remains in the Wyandotte running but it found no support for its last bid and previous winner Cordish Co. withdrew amicably from its Kansas Speedway project so that it could be downsized. Casino-enabling legislation in the Sunflower State didn't allow Cordish to revise its proposal once it had been accepted by the Lottery Board. But Cordish promised it would be back, and it was.

Lottery Executive Director Ed Van Petten told media Golden wanted to conserve its assets, adding, "They are being conservative and playing it smart. I hate to see it, but I fully understand." Golden executive veep Rod Atamain's diplomatically phrased withdrawal alluded to preserving liquidity, among other motives:

"While we believe in the long-term viability and appeal of our site and project, we are not confident in making such a commitment on our own in the current environment." That's tantamount to an admission that Golden couldn't find lenders, especially considering Atamain's previous reference to "ongoing turmoil in the financial markets."

It would have been a tough call for Kansas. The Cordish and Golden projects were comparable in budget ($700 million vs. $662 million). As appealing as a Tom Watson golf course might be, Cordish's promise of a 50% larger slot base than Golden's would have been sweet music to state officials weathering a deep recession and counting the gambling receipts before even one handle is pulled.

In the meantime, Golden still has that liquidity it wants to preserve -- and its cash flow will improve this summer as liberalized casino rules in Colorado (Golden's primary market) take effect. It could always spend some of that dough close to home: Golden CEO Blake Sartini is the brother-in-law of Frank & Lorenzo Fertitta. What are the odds the Fertitta clan might try to spin off assets to Golden? It would enable Station Casinos to sweeten the offer it's making to bondholders and keep Boyd Gaming at bay, all in one fell swoop.

Just a thought.

F'bleau blues

Thu, 14 May 2009 16:01:00 -0700

Lawsuits are flying thick and fast in the sad saga that is Fontainebleau. From terminated construction overseer/auditor CCCS International comes a new set of allegations. If true, they would significantly strengthen the case that F'bleau was in default, as its underwriters contend. CCCS accuses F'bleau of being disorganized and dilatory (sounds like me), as well as engaging in some ledger-demain to the tune of $40 million, partly involving "inappropriate payment methods."

Some of these contentions bolster lenders' claims that F'bleau was behind schedule and over budget. Actually, we'd already been hearing the "behind schedule" rumor here at LVA well before the banks pulled the plug, but it was never more than scuttlebutt. Also, F'bleau spokesman Dave Satterfield's rebuttal goes well beyond the usual, "We believe the allegations are without merit" boilerplate.

If this dead-serious game continues in its present course, the inevitable next step will be for F'bleau to sue CCCS, accusing it of being in cahoots with Deutsche Bank. There's liable to be quite a cat's cradle of charges and countercharges before we see the end of this.

F'blown?

Wed, 13 May 2009 18:46:00 -0700

Ownership at Fontainebleau is alleging heinous doings by Deutsche Bank to subvert F'bleau (which gives every indication of being destined to fail without external assistance). Supposedly, Deutsche Bank was confabulating with a consortium of 10 other banks to shove F'bleau under the bus, in order to improve the chances of The Cosmopolitan. Deutsche Bank is the default owner of the Cosmo, developer Ian Bruce Eichner having proven illiquid.

Now, I love a good conspiracy theory as much or more than the next man but, absent hard evidence, I'm finding F'bleau's allegations a tad lurid even for my taste. Besides, Deutsche Bank's share of the $770 million in funding that got yanked out from under F'bleau -- a deplorable move, but for other reasons, IMO -- is only $80 million. That's chump change compared to the $3.9 billion Cosmo albatross around the bank's neck.

In the immortal words of Dr. Daniel Jackson, "Anyway, I'm sorry, but that just happens to be how I feel about it. What do you think?"

Ya think? Here's one for the "No shit, Sherlock" file. Enjoy.

Quote of the Day

Wed, 06 May 2009 15:10:00 -0700

"While some operators claim to see a faint light at the end of the tunnel, Steve Wynn remains somewhat more guarded [in] outlook. We won't attempt to judge who is right or wrong ... we would note that, in our experience, Mr. Wynn has been honest in his quarterly assessments ... and generally quite accurate." -- BMO Capital Markets analyst Jeffrey Logsdon reacting to Wynn Resorts' most recent earnings call.

Quote of the Day

Fri, 01 May 2009 15:15:00 -0700

"The hope for mega-projects is gone for quite a while. The banks have all they can take of Las Vegas." -- M Resort CEO Anthony Marnell III, addressing the Nevada chapter of the National Association of Minority Contractors.

CityCenter update

Thu, 30 Apr 2009 11:20:00 -0700

One not-so-small I detail that I omitted in my report on yesterday's declaration of detente between MGM Mirage and Dubai World: The latter is released from its completion guarantees. Which puts the onus for finishing the project squarely on MGM's shoulders. As we on the Vegas Gang collective (like the Borg, only nicer) predicted a good ways back, MGM's future is inextricably entwined with CityCenter.

From the glass half-full perspective, the mortgaging of MGM Grand Detroit and Gold Strike ensures at least a modicum of regional diversity in the lion's den. A week ago, it looked as though the company might very well circle its wagons around Las Vegas, while maintaining a small beachhead in Macao. But with the search for the last last, elusive $1.2 billion in bank loans having evidently been abandoned, asset sales are becoming imperative.

What a tragedy that, at the very moment the casino industry is ripe for "unbundling," reversing mega-consolidations that should never have been attempted, the banks are too afraid to part with their precious TARP money to help bring it about. Unless you can do a Phil Ruffin and basically pull $600 million in cash out of a drawer, it's no casino acquisition for you!

Dubai World wins, MGM doesn't lose

Wed, 29 Apr 2009 18:14:00 -0700

The "CityCenter six-pack" lives on, thanks to a late-breaking accord between MGM Mirage and bickering spouse Dubai World. It's a tactical victory for MGM, in that it -- among other things -- keeps the project moving forward and forestalls the prospect of bankruptcy. But it looks as though, when the points are tallied, Dubai World comes out ahead.

CityCenter: Is it too late to bring back the Boardwalk?

Dubai World's biggest concession is to drop its March 22 lawsuit against MGM, which was endangering completion of the metaresort. Lenders also yielded significant ground by agreeing to immediately release $1.8 billion in credit which had been heretofore contingent upon several hundred million dollars' worth of put-in by MGM and Dubai World. Both debtors agreed to a 2% interest-rate hike but MGM was able to gain a temporary waiver of certain debt covenants.

The days of getting $7 billion with no strings attached are over, though: Instead of selling its Gold Strike and MGM Grand Detroit casinos, the company is pledging them as collateral (along with unspecified raw land, probably the "Project Z" site south of Mandalay Bay) for its senior debt. Beau Rivage's fate remains unknown. Cost overruns at CityCenter will be collateralized by Circus Circus and "certain adjacent land" ... i.e., what was going to be the site of an MGM/Kerzner joint venture. MGM CEO Jim Murren had been maintaining that he wasn't going to tear down the clown castle -- and now he can't, even if he wished.

If condominium sales hit $250 million, that money can go toward construction costs. However, if they don't reach $243 million, then MGM is on the hook for the difference. It's also fully responsible for construction costs that push the price tag beyond $8.5 billion. As a consolation prize, it gets the $135 million that Dubai World should have paid toward the joint venture over the last five weeks -- a shortfall that MGM had to make good out of its own coffers.

As the Las Vegas Sun summarized the pact, "The bottom line is that the most important construction project in Las Vegas and the gaming industry will proceed and open as scheduled, with it likely boosting revenue for MGM Mirage but hurting competitors already suffering from an oversupply of hotel rooms in Las Vegas."

Everybody can now heave a giant, grateful sigh of relief and go back to business as usual, like ...

Look out below! Forty-seven stories of glass at CityCenter's Mandarin Oriental and not a one of them has been inspected. Sadly, that's become par for the course with this project: Another day, another graveyard-humor headline from the former site of the Boardwalk.

Said the MGM spokesman given the thankless task of handling this latest revelation: "In the end, we want to build a structure that's comfortable and enjoyable to the guests and beautiful to behold -- and also meets, to everyone's satisfaction, the highest safety criteria." Until then ... duck!

Adelson in denial

Mon, 27 Apr 2009 13:00:00 -0700

"We don't have any intention now, and we have no intention of having an intention in the very near future. Right now, it's not necessary for us to do this." That's what Sheldon Adelson said back on March 24, regarding his newly gained flexibility to buy back debt.

Not necessary? Even when his Las Vegas Sands has a 15:1 debt-to-earnings ratio (worst in the industry)? When Sands Macao may -- in what would be a true desperation move -- be on the block for $1.3 billion? Adelson sounds like a man who won't know his company is falling off a cliff until after it hits the canyon floor ... and maybe not even then.

Case Bets: Isle exits U.K.; no room at the Trop; Carlino channels Astaire, etc.

Fri, 24 Apr 2009 17:22:00 -0700

Isle of Capri Casinos is coming up for air, literally extricating itself from underneath Ricoh Stadium in Coventry, U.K. As part of CEO James Perry's attempt to refocus a company that spread itself too thin under his predecessor, he's walking away from an ill-starred British venture. Rank Group not only assumes Isle's lease, it gets the casino itself for pocket change, by industry standards: $940,000.

Perry may also be preparing to unload Isle's Pompano Park racino in the disappointing Florida market. At least one analyst is now picking Isle, so recently stuck in the mud, as one of the better bets to emerge intact from the gaming group's crisis.

A house divided cannot flush. Staggering from miscalculation to mishap, the Tropicana Las Vegas has sustained another self-inflicted wound. But don't blame current steward Tropicana Entertainment, predecessor Columbia Sussex or even Aztar Corp. The non-kosher plumbing that got the Paradise Tower shut down dates back to the 1990s, when the Trop was under divided ownership (one of the many obstacles to its redevelopment). The scary part is that it took at least 10 years for the code violations to be discovered.

The real victims, of course, are the hotel guests who are getting bumped from their Paradise Tower rooms. Since it's far and away the nicest part of the Trop, by definition they'll be moving to less-desirable rooms, some of them in truly decrepit parts of the hotel. Given the condition of the Trop's physical plant when I made a "secret shopper" visit, today's news comes as less than a surprise. The resort's advancing years were bound to catch it out sooner rather than later.

Penn's fancy footwork. While not out-and-out denying an attention-getting New York Post story about a possible 'credit bid' play for The Mirage, executives of Penn National Gaming were at some considerable pains to imply that it was all smoke, no fire. CFO William Clifford put it thusly: "... there were quotes and things said that have been pulled all the back to the last year’s Gaming Conference ... I’m not quite sure that the Post article is a very good reflection of anything we’ve ever said at any point in time."

CEO Peter Carlino followed with, "Some of the most interesting quotes were made at a time when none of the stuff that you are all currently thinking about was out there so it’s unfortunate. It’s just a hodgepodge of things pulled together to make a story. We would have preferred not to have seen it that way. Look, common sense says if there’s an opportunity we’re going to follow it but it’s no more exciting than that; enough said." [Emphasis added]

A Bloomberg News report that Penn was pursuing Greektown Casino went unaddressed in yesterday's earnings call. To the extent that Carlino was willing to commit himself on Las Vegas, he said Penn wanted no more than a single property "if we can find one." The consensus of Penn execs was that Vegas would be a "viable" market for the company ... in five years. (The company's strategy is partially predicated on an exodus of Californians relocating to Vegas and jump-starting the local economy.)

Sadly, Atlantic City seems to have slipped off Penn's radar screen altogether. On a happier note, the company promises a new and "exciting" replacement for the Empress Joliet pavilion that was destroyed by fire -- which makes it sound like the previous Ye Olde Egypt theme is now history, so to speak.

Schreckliche Idee! At a time when institutions like Goldman Sachs and Deutsche Bank control ever-larger chunks of the Strip, the Nevada Gaming Commission is seriously considering lowering the threshold of scrutiny even further. (Because if there are any two words that instill confidence nowadays, those words are "Wall Street.")

The man fronting this idea, veteran gaming attorney Frank Schreck, argues that his proposed rule change wouldn't result in casinos ceding managerial or operational control. However, that's already happened at the Las Vegas Hilton, where a Goldman-owned stalking horse holds a sizeable minority interest. What he's proposing would take a bad precedent and codify it.

By linguistic coincidence, schreck is the German word for "fright" and the root of schrecklich or "horrible." Which is what this idea is. But Nevada regulators are already overburdened and about to become more so, once the next budget is enacted. Given that grim future, Schreck's proposed lightening of their workload will be probably be embraced.

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.)

Morrison counsels MGM

Wed, 22 Apr 2009 14:39:00 -0700

Why keep making fun of the Las Vegas Review-Journal? Because the R-J persists in making it so easy, that's why. For instance ...

Call the Sun. Columnist Jane Ann Morrison has some deep thoughts on MGM Grand Macau. Namely that co-owner MGM Mirage should consider "a reasonable offer" from partner Pansy Ho. Gadzooks! With that kind of insight, it's a wonder Morrison isn't running MGM in lieu of CEO James Murren.

Actually, she might want to put in a call to Las Vegas Sun/In Business Las Vegas veteran Jeff Simpson, who'd explain to her -- as he did to fellow panelists on a "Vegas Gang" podcast -- that Macanese subconcessions can only be sold back to their original concession-holder ... in this case paterfamilias Stanley Ho. Which would be one reason why "Morgan Stanley hasn’t been asked to screen offers for the [sic] MGM Grand Macau." But, hey, if Dr. Ho comes knocking, make sure it's with "a reasonable offer," 'kay?*

R-J to Sun, "Nyah-nyah!": Yeah, so what if the Sun won a little old Pulitzer Prize. The R-J nabbed a "Best of the West" from Arizona-based First Amendment Funding. So there! That Sun is, like, so totally spanked.

On the upside, today's R-J has a good exposition of why banks and other lenders are exercising so much forbearance (in both senses of the word) when confronted with insolvent casino companies. Money quote, as it were: "... the creditors are thinking the way things are now, we just might as well string them along for a little while thinking you'll get more of a return on the bonds that way." Forced asset sales will probably be remunerative a ways out, too ...

* -- Morrison is at least in good company here. Charlie Rose's recent 60 Minutes piece on Steve Wynn repeatedly committed the solecism of referring to Wynn's newest pleasure palace as "The Encore." If you see Rose, be sure to tell him how much you enjoyed his The 60 Minutes segment on The Steve Wynn, which you watched on The CBS.

Carlino's Way: a brilliant Mirage gambit

Wed, 22 Apr 2009 13:14:00 -0700

Considering that Penn National CEO Peter Carlino would have paid far less for Treasure Island than the $775 million (bargain) price that Phil Ruffin ponied up, it's been looking like Hell might be hosting the Ice Capades before Carlino could secure a trophy property on the Strip at a dollar figure he deems affordable. Factor in the reported reluctance of both MGM Mirage and Harrah's Entertainment to part with Strip properties for less than 10X cash flow -- and maybe not even that -- and you figure Carlino and a first- or even second-tier Strip property are going to intersect sometime around the Twelfth of Never.

Carlino's criteria for buying into the Strip, as set forth in a March epistle, are exceptionally conditional: “We’re watching things very closely but will pounce only when the sun, moon and stars align. Penn National can wait as long as need be to make acquisitions that will be opportunistic and, more importantly, return-focused.” Run this month-old e-mail through the Wishful Thinking Machine at the Las Vegas Review-Journal and you get a headline like, "Penn National ready to 'pounce'."

But soft ... what light through yonder tabloid breaks? 'Tis the east and Peter Carlino is the sun. Arise, fair Carlino and buy The Mirage! Although Kirk Kerkorian, MGM Mirage and Penn National are doing their best impersonation of signifying monkeys, Post reporter Josh Kosman is onto a story that, if it pans out, will leave Strip observers gobsmacked. It would appear that Carlino has indeed found a means for bringing sun, moon and stars into alignment that gets a '10' for creativity.

In essence, banks holding some of the $7 billion in unsecured debt that comes due two years hence would make a 'credit bid' on The Mirage, trading debt for property. In turn, they'd hold it as collateral against an eventual repayment by Penn National, which would cross MGM's palm with a downpayment of unspecified size -- but probably small enough that Carlino could crow, "Victory is mine!"

(Interestingly, Penn is also reported by Bloomberg News to be sniffing around for a Detroit casino. It's not MGM Grand Detroit -- which may go wanting for prospective buyers, according to Kosman -- but bankrupt, red ink-ridden Greektown Casino. Given the hard bargains Carlino likes to drive, somebody's going to end up eating Michigan-sized debt if that deal should go through. No way Penn takes on the $777 million Greektown owes.)

It's a variant of an earlier ploy, rejected by MGM CEO James Murren, in which Boyd would have relieved MGM of some of its bonds in exchange for a Strip casino. “[Murren] fixated on the multiple we’d pay. I suspect that attitude may have some flexibility now," gloats Penn CFO William Clifford. Carlino says that Vegas holds "a dozen" casino-hotels that would fit the mid-market niche of Penn's customer base. He's openly ruled out Tropicana Las Vegas, so if a Mirage deal evaporates, what remaining resorts might comprise Carlino's Eleven?

Icahn vs. Kerkorian III

Mon, 20 Apr 2009 15:25:00 -0700

Former Stratosphere owner Carl Icahn says it's nothing personal, just business. This is reposted here because, among other reasons, the version embedded by the Las Vegas Review-Journal plays only in an extremely constipated manner. Here's hoping we do better. Best moment: Icahn tries to bullshit "Money Honey" Maria Bartiromo, who's not having any of it and comes back at the old raider twice as hard. Good job.

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.

Dr. Feelgood is on the case

Fri, 17 Apr 2009 14:37:00 -0700

With Deutsche Bank bailing out of its coverage of casino stocks, analyst Bill Lerner is testing the waters with his own firm. Normally this wouldn't rise to the level of an S&G mention (other than perhaps to deplore Deutsche Bank's cutback) had Lerner not stuck his neck out as follows: "Lerner said Union Gaming will not be a 'cheerleader' for the gaming industry, but views the gaming industry as a long-term opportunity."

That's pretty rich when you consider that Lerner and rival analyst Larry Klatzkin are the "sunshine boys" of the gaming group. There never was a dark cloud from which they've been unable to extrapolate a silver lining. (Though some of the wacky pronouncements emerging from those crazy kids at Sanford Bernstein are starting to make Klatzkin and Lerner look dour.)

One of the all-time best Lerner bon mots came during a Face to Face TV taping, in which he told interviewer Jon Ralston not to worry about Station Casinos' current pickle, it had strong management in place -- you know, that same crackerjack managerial team that drove Station into the ditch in which it's currently spinning its wheels, struggling for traction.

For those who feel there's too much pessimism in current gambling coverage, Union Gaming's research reports should be just what the doctor ordered.

Icahn vs. Kerkorian II; Ho hearts Adelson

Fri, 17 Apr 2009 11:18:00 -0700

Yesterday saw some intemperate spluttering in newspaper comment threads, along the lines "How dare the Wall Street Journal report the news? It might damage stock prices!" (One hothead even bruited the possibility of a libel suit.) All of which was predicated on the assumption -- and we know what happens when we assume -- that the WSJ was merely chasing rumors when it reported that Carl Icahn and Oaktree Capital Management were putting the squeeze on MGM Mirage, trying to steer it into bankruptcy. (Some -- including The Economist -- think a CityCenter-driven bankruptcy is inevitable, regardless.)

Undeterred, the WSJ is back with the full story today and it's the real deal. Icahn and Oaktree are not acting in concert and their agendas are different. Icahn is thought to be angling for a piece of the company while Oaktree likes MGM the way it is, if only it could "clean up its balance sheet." Were they able to force the bankruptcy issue, their rights would supersede owner Kirk Kerkorian's and regime change would surely follow.

But that presupposes a great deal ... not the least the 'great deal' MGM got from its bankers when it was able to borrow $7 billion unsecured. Also, crunch time is still a long way off. Icahn and Oaktree's best chances for bending MGM to their will won't come until July or October, when an aggregate $1.5 billion in bonds must be repurchased. In order to prevail, either Oaktree, Icahn or both would have to thwart that repurchase, presumably by refusing to tender their bonds. But MGM still has a few cards to play in the meantime.

Across the Pacific, Bloomberg has the skinny today on what went down at Sheldon Adelson and Stanley Ho's secret lunch at Venetian Macao earlier this week and a subsequent summit meeting yesterday. (Melco Crown Entertainment CEO Lawrence Ho joined the oligarchs, as did MGM Grand Macau co-owner Pansy Ho, along with a local proxy for Wynn Resorts).*

It seems that detente is the word for the day, with the two ancient enemies agreeing to forego their arms race in favor of cooperation. Or, as the 87-year-old Ho put it, “Everyone agreed not to compete, to have enough rice to eat and to get more taxes for the government." (Adelson was uncharacteristically mum.)

... where the elite meet.

Considering the "cutthroat competition" (as Ho once put it, shortly after some junket operators had their throats slashed) that's prevailed so far in Macao, this new entente cordiale sounds like something that's going to be far easier said than done -- especially when the market begins to rebound. The latter already shows signs of bottoming out. MEAG Hong Kong Ltd. Investment Director John Koh speculated prior to Thursday's superpower meeting that the Adelson/Ho accord would mandate:

• one standard rate for junketeer commissions

• a salary freeze

• a hands-off policy toward one another's VIP ~~players~~ hosts and/or key executives

Since Adelson has several Cotai Strip™ projects -- including a St. Regis and a Shangri-La -- gathering rust, could his sudden amity with the Ho clan be a means of courting bailout money? And how would the Macanese government -- to say nothing of Steve Wynn -- react to the prospect of a polyamorous alliance betwixt SJM, Las Vegas Sands, Melco International and Ms. Ho's Shun Tak Holdings, say? Such a hyrda-headed oligopoly would give competitors a great deal to worry about and seems far from inconceivable, given the desperate circumstances of certain of the parties involved.

*--Galaxy Entertainment seems to have been conspicuous by its absence, but that underachieving company has other Koi fish to fry. The fact that Galaxy is writing down the value of its license, though, says less about the Macao market than about Galaxy and its failure to make substantial inroads, despite being one of the first companies on the scene.

Icahn vs. Kerkorian

Thu, 16 Apr 2009 16:06:00 -0700

According to a brief item in the Wall Street Journal, former Stratosphere owner Carl Icahn and investment fund Oaktree Capital Management are putting the squeeze on MGM Mirage and its majority shareholder Kirk Kerkorian. Quoth the WSJ, Icahn and Oaktree "have each gobbled up hundreds of millions of MGM Mirage bonds and have told the troubled casino giant it should quickly overhaul its massive debts in bankruptcy ... " And where does Carl Icahn especially like to make acquisitions? In bankruptcy proceedings, that's where. The paper says Icahn and Oaktree have made it known to MGM that bankruptcy "is the best option" for the company." Whether or not Icahn's endgame is to wrest MGM away from Kerkorian or simply to get a seat at the table, we could be looking at a real clash of the titans.

Case Bets: Seminoles, Iverson, Harrah's, PartyGaming, Station's luck, etc.

Wed, 15 Apr 2009 16:01:00 -0700

Down in Florida, the tide may be turning in favor of the Seminole Tribe. Both the Florida Retail Federation and Restaurant Lodging Association have thrown their support behind the status quo, as represented by Gov. Charlie Crist's Class III casino compact. Crist's unilateral gambling expansion has the not-so-small problem of being unconstitutional but this latest turn of events ratchets up the pressure on solons to pass a version of the compact that meets judicial muster.

That'll be no problem with the state Senate but the uptight House would like to roll back the Seminoles to slots-only status (and would get rid of the casinos altogether, if only they could in their benighted heart of hearts). The table-game genie isn't going back into the bottle -- at least not until the federal courts have their say -- so the Solomonic question at hand is how to level the playing field for private-sector racinos without sacrificing the Seminole tax revenue that Crist secured. Easier said than done, obviously.

"Is too!" "Is not!" Both MGM Grand Detroit and Greektown are refuting a report in the Detroit News (with which MGM has taken issue before) that they'd 86'd former Philadelphia 76er Allen Iverson from their casinos. Let's face it, the man is a boor but he's a wealthy boor, so neither casino is likely to turn him away as long as he only bounces basketballs, not checks.

Headless casino. Not only did Harrah's Entertainment sack the GM and five other execs at Harrah's Reno, it won't be replacing them. At almost any other company, running a casino by remote control would come as a surprise but Harrah's has the reputation of employing a ruthlessly standardized business model. Besides, the company has to free up some dough to pay its new Internet/World Series of Poker guru Mitch Garber, whose former employer, PartyGaming.com, just cut a deal with the feds.

The luck of the Fertittas. Dodging yet another bullet, Station Casinos extended negotiations with its debtors by another month. While some form of bankruptcy at Station is inevitable, the company continues to fend off a takeover attempt by Boyd Gaming. However, Station says that when it comes to the terms offered to unsecured creditors, it's hanging tough. If that's the case, what's to discuss? (Or is Station being more flexible than it's letting on publicly?) My money, so to speak, is still on Station brass and co-owners Colony Capital retaining possession of Station and at a substantial discount to its market value, too.

An obscure racino company is cleaning house and relocating from Las Vegas (where it had no logical business being headquartered) and back East, where all its business is. The board of Empire Resorts really wasn't minding the store, was it?

The company might at least saved a bundle on long-distance charges if it had condescended to have its corporate offices in New York State, where its physical operations were, and not in tax haven Green Valley. But don't cry for outsted CEO David Hanlon, who parachutes out with 100 grand and plus another hundred large for nine months of "consulting services." These days, nothing succeeds like failure -- provided it's done on a grand scale.

Update: These are the same clowns whose Maryland slot application got tossed because they didn't bother to include the mandatory application fee when they filed.

Pennsylvania's biggest gaming screwup is history ... sort of. Former Mount Airy casino owner Louis DeNaples is guilty as hell of hanging out with the wrong crowd but innocent of perjury and will maintain one degree of separation from the casino, which remains in the DeNaples family. The Pennsylvania Gaming Control Board can claim a semblance of victory but the four-and-a-half-year imbroglio is a lingering embarrassment to a body whose vetting process has been inarguably the sloppiest in the U.S.

The PGCB needs to pay more attention to background checks and less to "juice" (see Barden, Don) -- and also to develop questionnaires that aren't so "imprecise and potentially confusing" they could open applicants to charges of perjury. It would also behoove Pennsylvania to quit "stovepiping" PGCB and state police investigations. Were it not for a lack of information-sharing (prohibiting by Keystone Kop, er, State law), this whole mess would probably have been avoided.

James Dobson admits he's a loser

Wed, 15 Apr 2009 14:51:00 -0700

Whiny anti-gambling obssessive (and sometime pediatrician) Dr. James Dobson exited his Focus on the Family with an admission that he's on the losing side of the culture war. He blames it on the Nineties, Bill Clinton and that damned Internet. (A bit behind the times, isn't he?) At least Dobson needn't worry about "made fools for Christ." He's been doing a splendid job of making a fool of himself without any assistance whatsoever -- and shows every indication of continuing to do so.

Don't let the doorknob hit you on the way out, Jimbo.

Ader returns. Once the most-read (and arguably the most-feared) gaming analyst on Wall Street, Jason Ader is back in the picture as the newest board member of Las Vegas Sands. Here's hoping he'll have better luck than his predecessor at exercising a modicum of restraint upon CEO Sheldon Adelson, who's been in a pedal-to-the-metal frame of mind lately. Unlike the appointment of Michael Leven as Sands' new prez, this is one Adelson hire whose resumé won't be open to second-guessing.

Fun with numbers. Nevadans, apparently angry about having the day off or maybe irked from shouldering the second-lowest tax burden in the nation (Wyoming is #50) rallied in Carson City today. A Southern Nevada anti-tax newsletter estimates the crowd at 2,000. Local constabulary spotted only half as many, tops. (Subseqently revised to "more than 1,000.") I hope Stephens Media is better at bean-counting than head-counting.

Gibbons Follies. Having lain low for a few days, Gov. Jim Gibbons is back in the news with a vengeance. After saying he simply wouldn't sign a domestic-benefits law making its way through the Nevada Lege (about the only solid accomplishment emerging from that frivolous convocation), all it took was a quick chat with untiring homophobe Richard Ziser to make Midnight Jim wimp out completely. Now he says he'll veto the bill, thereby continuing to consign many Nevadans to second-class citizenship. (Supporters of the bill are trying to get Gibbons' ear but are more likely to receive the back of his hand.)

This is just plain wrong and a slap to a lot of hard-working, taxpaying citizens whose committed relationships might as well not exist, as far as the current law is concerned. "I just don't believe in it," sayeth Midnight Jim in re domestic-partner benefits for gay and lesbian citizens. Judging by his two divorces, Gibbons doesn't put great store in conventional marriage, either.

Jim Gibbons finds something he can believe in.

But alas, his latest strategem for meeting chicks laid an egg. Or did it? You be the judge. More seriously, Nevada can't afford to fill open Nevada Gaming Control Board positions but it can afford 5,000 gubernatorial eggs? Something's cracked here and it's not an eggshell.

Adelson meets Ho: Shall we dance?

Wed, 15 Apr 2009 11:17:00 -0700

It's appropriate that a top-hush luncheon between Sheldon Adelson and chief adversary Stanley Ho was held in a Venetian Macao ballroom: Even in such a spacious venue, it must have been a tight squeeze fitting both tycoons and their respective egos in there. A Las Vegas Sands mole told Macau Business it was a social encounter "with no particular business agenda."

"What a nice casino you have, Sheldon. I'm really going to enjoy owning it."

Perhaps the duo simply commiserated over the recent decimation of their personal wealth. If so, it was a waste of time because the two men have quite a lot else to discuss. Adelson, for one, has performed a volte-face on the issue of junket commissions. Sands used to be the worst obstructionist of Macao CEO Edmund Ho's commission cap, even when escalating commission wars threatened to render Macao casinos a revenue-negative venture.

Now Adelson and Ho are on the same page, wanting commissions to be lower still. (It's amazing what a little mutual adversity will do.) They also share a desire for a lower casino tax. Lotsa luck there, although they might be able to sell it to Peking as an palatable tradeoff for continued visa restrictions.

Perhaps a large heaping of crow -- a dish not customarily favored by CEOs -- was on Adelson's plate. According to Macau Business, "the SJM managing director [Ho] also said he would be interested in buying part of LVS business in Cotai." It would be the comeuppance to end all comeuppances if the price of keeping the Cotai Strip™ alive would be for Adelson to cede partial ownership to Stanley Ho. The latter's been Adelson's verbal whipping boy ever since the sultan of Sands vowed to reinvent Macanese casino industry. Which he did, but it's been a Pyhrric victory.

A grudging Adelson-Ho detente -- perhaps even alliance -- is no longer the preposterous scenario it would have been just six months back. Public pronouncements to the contrary, Sands appears nowhere near to landing equity partners for its frozen Cotai Strip™ projects and Adelson's recent stock purchase was regarded as a critical "tell" in this regard. Or, to put it another way, if a deal were in the offing and Adelson -- knowing that -- bought LVS low, he'd soon find himself spending quality time with the SEC. Adelson may be rash but he's nowhere near stupid.

It will be poetically apt if Tuesday's ballroom setting prefigures the emergence of Stanley Ho as Sheldon Adelson's dancing partner. The Sands CEO could do much worse. Dr. Ho is a trophy-winning terpsichorean tycoon, famous for cutting a stylish figure on the ballroom floor. An Adelson-Ho pas de deux would be the most fascinating Dancing with the Stars pairing yet.

P.S. Special thanks to GamingFloor.com Editor Ian Sutton for the heads-up.

How the Grinch Stole MGM Mirage

Mon, 13 Apr 2009 18:27:00 -0700

By george, the folks at MGM Mirage sure made a monkey out of me. There I was, believing the company had learned a lesson from the toxic PR it engendered back in the fall of '01. In a panicked overreaction to 9/11, the company savagely downsized its workforce, supposedly earning its then-CEO the in-house nickname "Osama bin Lanni." Since then, MGM has generally been more circumspect in its economy measures, leading one (well, me anyway) to believe it wouldn't make the same mistake twice.

Until now.

While MGM Mirage CEO Jim Murren and colleagues may be saying the right things for public consumption, their actions sometimes sound a jarring dissonance. For instance, at a time when the company is scraping from payment to payment on CityCenter, it suggests congenital tone-deafness to award Murren a $500,000 raise and $7 million severance package (just in case he has to take the fall for CityCenter, for instance) at this particular juncture.

In the abstract, MGM could justifiably ask, Why pay Jim Murren less than the $1.9 million with which Harrah's Entertainment is remunerating its CEO, Gary Loveman ... never mind the $2 Million Man, new Las Vegas Sands President Michael Leven, who's on pace to be the most over-compensated gaming executive of 2009. All things being equal, Murren and Loveman are grossly underpaid on the Leven Scale.

But there's the small matter of context ... as in, giving your CEO a 25% pay boost at the same time your rank-and-file employees are getting hit with a triple whammy: revoked COLA raises, an increase in health-care premiums and no 401(k) matches for 2009. It's like the Grinch stole Christmas, Easter and Thanksgiving for good measure. According to the Las Vegas Review-Journal, it was informed by an MGM spokesman that employees "will be allowed to keep the extra money earned in the quarter." Isn't that sweet?

Dubai World's big offer, at least as reported in the Wall Street Journal, appears to be less than meets the eye. It's premised on the project's lenders waiving a requirement that Dubai World and MGM chip in a required $730 million-$800 million en route to unlocking a $1.8 billion credit facility. In return, Dubai World will presumably quit sulking and resume its financial participation. It's a pretty audacious gambit but with CityCenter circling the Chapter 11 drain, bankers could well deem it the lesser of two evils.

Update: The YouTube video, posted earlier today, has been fixed and is now available for your viewing please. I apologize for the temporary inconvenience.

A delicate balance

Tue, 07 Apr 2009 17:51:00 -0700

Another day, a little more movement in the CityCenter situation. Well, it's that or talk about tourism and gaming revenue numbers that are too depressing to contemplate for long.

Time was that the American banking industry was practically giving away money, not requiring MGM Mirage to pledge assets for collateral. Lucky for MGM, lucky for us, not so lucky for the banks. That's going to change and Liz Benston delineates the tightrope that MGM will have to navigate to keep both banks and bondholders happy -- a delicate balancing act indeed. The one casino MGM can neither unload nor borrow against is New York-New York, presently encumbered with three-quarters of a billion dollars' worth of junk bonds.

Meanwhile, James Packer continues his CityCenter softshoe routine. According to Bloomberg (see sidebar), while Crown Ltd. may not be talking to MGM or Dubai World directly, it's reported to be exchanging notes in study hall with Colony Capital ... hence the carefully couched denials Crown issued last weekend. Since Colony will be merely lending to MGM, not investing (assuming negotiations bear fruit), that'll spare the fund from having any uncomfortable chats with Station Casinos, which has near-Strip aspirations of its own. Besides, if MGM defaults, God forbid, Colony might find itself with a gem like Slots A Fun or maybe even Circus Circus, and could whistle Station in to run it.

The terms of the alleged deal -- $750 million toward debt structuring -- more than suggest that MGM has given up on any getting any more dinero out of Dubai World. If it can "clear waivers" with its lenders, it looks as though MGM's preparing to shoulder the next $800 million worth of CityCenter costs by its lonesome. Another bit of good news for Kirk Kerkorian's company is that Deutsche Bank analyst Bill Lerner has revised the EBITDA estimates of Beau Rivage and MGM Grand Detroit up a bit. Lerner's new numbers would bring the theoretical asking prices (using 7X cash flow as a baseline) to $715 million and $940 million, respectively. The question of how anybody not named Penn National is going to persuade lenders to underwrite such a deal is still begged, though.

I wonder if Barbara Cappaert of KDP Investments ever tires of having to be the one to point out the elephant in the middle of the room, namely that MGM is pawning tomorrow to pay for today. That $235 million-plus in annual Biloxi/Detroit cash flow is going to be sorely missed.

If anybody ever writes the history of the casino-hotel currently known as the Greek Isles, it'll only have one chapter ... Chapter 11. The Isles has known many incarnations but it always seems to find its way back to bankruptcy court sooner or later (usually sooner). It's eked out a marginal existence for such a long time that perhaps the casino evolutionary process needs to "select out" the Greek Isles, which occupies a forlorn backwater between the Convention Center and the Strip.

Anyway, if you enjoy bankruptcy filings, this one should keep you busy. Since the Isles is more of a slot-route outpost than a casino, the alphabet soup of ownership groups is of debatable relevance to its gambling operations, though. Will the last person to leave the Greek Isles please turn out the lights.

For Rent: One blimp, slightly used. Gets 2.1 MPG. Annual operating cost $1.1 million. Your logo here.

MGM Mirage sells family jewels

Mon, 06 Apr 2009 17:39:00 -0700

Desperation has well and truly hit the fan at MGM Mirage. The company's Strip casinos may not be priced to move ... but it's said to be quite a different story where MGM Grand Detroit and Beau Rivage are concerned. (A Bloomberg report implies that Gold Strike in Tunica may be on the table, too.)

How desperate? We're talking about sacrificing $231 million in cash flow (in a down year) to keep CityCenter alive. Outside of Vegas, all the company would retain would be "halfsies" of Borgata, MGM Grand Macau and the Grand Victoria riverboat in Elgin, Il. We'd by definition be talking about considerably increasing MGM's Vegas exposure, especially since CityCenter would -- one hopes -- be mostly open for business by the time these potential sales cleared the regulatory process.

Strategically, it stinks. MGM would be putting nearly every chip it has on the Strip. At a time when regional markets are outperforming Las Vegas, MGM would be removing two of the most vital bet-hedges it has and doubling down on the Strip. With a $7 billion debt payment hitting shore in 2011 and MGM about to go into competition with its existing Strip properties on an undreamt-of scale, if CityCenter doesn't lift all MGM boats, it'll be curtains for the company.

True, that $7 billion balloon payment could be -- has to be -- restructured. That may have been MGM's thinking all along: Confronted with reality, lenders would become more flexible with the deadline. Or perhaps the company expected CityCenter to throw off sick amounts of cash flow, solving the problem at one fell swoop.

Time is of the essence. MGM still has three financing hurdles, at least, to surmount. A) It has to dig under the sofa cushions for as much as $800 million [assuming Dubai World continues to sulk and welsh on its financial commitments] to keep the project going; and to get to B) $1.8 billion in additional debt financing; which still leaves it short of C) $1.2 billion in completion money ... the capital that not even the combined efforts of Sens. Harry Reid and John Ensign could jawbone loose from a suddenly risk-averse banking industry.

By selling Treasure Island to Phil Ruffin for 7.75X cash flow -- and if we discount the theoretical premium that comes with being on the Strip -- MGM has put itself in a spot where the logical price for MGM Grand Detroit is $917 million and Beau Rivage fetches $700 million. If it could realize that $1.6 billion (or more), MGM would have its back-end costs on CityCenter covered. But that still leaves a short-term need for $800 million, which is where ...

Colony Capital comes in. Seems that the private-equity firm is thinking in terms of a secured loan rather than a piece of the action. Worst-case scenario, Colony walks away with one of MGM's better Strip casinos in lieu of repayment (or more than one). It makes a helluva lot more sense than the prospect being floated last week whereby Colony would take Dubai World out of the project -- an expensive proposition that would get MGM no closer to having the money it needs to finish what will be either its crown or its masoleum.

Stranger still was the here-today, gone-tomorrow story that James Packer would be teaming up with Colony to help rescue CityCenter. This popped up online in the wee hours of Saturday and was kiboshed on Sunday evening. Crown Ltd., for its part, helped keep the story alive through some semantic footsie. It said it wasn't in talks with MGM or Dubai World -- which left open the possibility it was dickering with Colony instead. A less-equivocal denial was several more hours in coming.

Having a flutter on CityCenter would provide a convenient explanation for Crown's drawdown of its acquisition of Cannery Casino Resorts. However, one can but imagine the displeasure that would have erupted up the street at Fontainebleau if it emerged that a key investor (Packer) was flirting with an archrival project. Besides, it's not as though Packer doesn't have other problems with which to deal.

MGM could really use some good news but it's not going to come from Macao. Shun Tak Holdings, steered by MGM Grand Macau partner Pansy Ho, saw its profits wither by 90%. With Pansy and father Stanley Ho going through hard times, if MGM entertains any hope of flipping its Macanese subconcession back to them, it'll surely be a good ways off.

Bridge of Sighs. It was across aforesaid Venice landmark that the condemned passed on their way to execution. Outsted Venetian Macao executives don't have to traipse over a replica Bridge of Sighs but there's been quite a doleful procession of late.

Last week, President Mark Brown made the trek, according to the Macau Daily Times. It also reports that casino boss Vince Mascio and international marketing director Ming Lien were close on Brown's heels. Thanks to his recent stock purchase, Las Vegas Sands CEO Sheldon Adelson is more in control than ever. Is this Macanese purge a sample of Adelson Unleashed?

Adelson in the details

Fri, 03 Apr 2009 12:39:00 -0700

Nearly lost amidst a flurry of news stories about Las Vegas Sands hoping to jump-start construction on its stalled Cotai Strip™ (with the help of new equity partners) was this snippet from Sands' president of Asian affairs, Stephen Weaver. Rents at the Marina Bay Sands shopping mall, still under construction in Singapore, are being “pulled down to adjust to the market.”

Lower projected rents? Just one more reason to curb the irrational exuberance with which some Wall Street analysts view this $5.4 billion project.

Under the radar: Remember how Columbia Sussex told the New Jersey Casino Control Commission, in effect, "put it on our tab," when hit with a $750,000 fine? ColSux's original plan was to just have the NJCCC skim the 750 large off the top of whatever it got from selling the Tropicana Atlantic City.

However, the NJCCC informs me that ColSux affiliate Adamar settled up with the state a ways back. Bravo to them. Besides, if Carl Icahn wins the Trop with a credit bid, the casino will change hands but no money will. So much for the windfall everyone was anticipating a year ago.

Case Bets: Station Casinos, CityCenter, Pittsburgh, James Packer

Fri, 03 Apr 2009 11:22:00 -0700

Credit-default swaps, some of those financial instruments that have played hob with the U.S. economy, are making a cameo appearance in the tortured saga of Station Casinos. ~~If you insured Station's debt, that insurance is worth more than the paper your CDS is printed upon --~~ ~~but not by much~~.

Congratulations, MGM Mirage. Your probable rescuer is a bottom-feeder who's preparing to root around amidst the dregs of the banking industry. However, with CityCenter as much as $3.8 billion shy of the finish line, MGM isn't in a position be picky about going into business with the K-Mart of casino owners.

Rivers Casino, the former Majestic Star, has some CityCenter-style construction problems. This project has been so vexed and hexed that nothing comes as a surprise anymore.

Interesting business model. Halfway around the globe, Melco Crown Entertainment's got a lot riding on its City of Dreams megaresort. To bring back the whales, it's essentially promising that they can welsh on their markers with impunity. Or, as the company puts it, "Aggressive enforcement actions against a customer [may] unduly alienate the customer and cause the customer to cease playing at our casinos." And, gosh knows, nobody wants to alienate a deadbeat debtor.

"Too big to fail"

Thu, 02 Apr 2009 12:35:00 -0700

This week's Steve Friess column puts CityCenter's near-death experience last week superbly in perspective ... including MGM Mirage CEO Jim Murren's ingracious attempt to push the news media under the bus for simply reporting what was happening. Friess observes, re CityCenter's inception, "We were all touched with such boomtown fever that few in the press or the gaming industry publicly wondered whether such an endeavor made any financial sense."

To that charge, I plead guilty on all counts. And I've been kicking myself a lot lately for hitting the "snooze" button on my customary skepticism when CityCenter was initially unveiled.

There is good news in Las Vegas. But you have to look well off the Strip.

The Robe. Just in time for Holy Week, the first widescreen Biblical epic returns to video. Which may not be A Good Thing.

Hooters vs. Riviera

Tue, 31 Mar 2009 18:17:00 -0700

It's a race to Chapter 11 now, with Riviera Holdings in the lead. Its glandular-themed rival down the street is opting out of an interest payment and drawing down the last of its credit, never a promising sign. However, Riviera is forcing a confrontation with Wachovia Bank. Given a choice between hoarding cash on hand and making a $4 million interest payment, Riviera execs chose Door #1. That comes atop some scarifying 4Q08 numbers that included a $13 million loss, plus cash-flow declines of 64% on the Strip and 42% in Black Hawk, Colo. (Those newly enacted rule relaxations in Colorado can't come soon enough.)

Downward pressure on ADRs (not to mention 84% occupancy) and diminished convention trade (-28%) were blamed for the decision to conserve dollars. While the Riv recorded almost as much entertainment revenue as the year before, 27% of that took the form of comps to high-value players and thus came right back off the ledger.

The Riviera's appeal is not likely to be enhanced by the announcement it is renting out space to that bane of Strip visitors -- a timeshare company. "We have implemented and will continue to implement promotions to attract competing hotel customers to our property to enjoy our amenities," Riviera adds. Just don't order the powdered eggs, OK?

Station Casinos, meanwhile, closes the book on a poor-to-awful 2008. Cash flow was below $100 million for the fourth quarter, further underlining how overvalued the company's LBO price was.

No more sports betting ... at least not until football season at Bally's. What the hell. You can't bet on a Boston Celtics game there anyway.

Trop snoozes, loses

Thu, 26 Mar 2009 15:23:00 -0700

Like a hot potato, the Tropicana Las Vegas continues to bounce from Columbia Sussex to Tropicana Entertainment and now maybe into the hands of Alex Yemenidjian. (This management-contract arrangement looks more like laying the groundwork for a sale ... if so, thanks for taking S&G's advice, guys. It's worth what you pay for it.)

A top price of $380 million can be viewed either as a bargain -- $11 million an acre, a long way down from the berzerk price paid by ColSux two-plus years ago -- or a boondoggle, seeing as even $380 mil represents an 84X cash-flow multiple. Somebody's got a job ahead of them.

Unfortunately, TropEnt CEO Scott Butera hasn't had his eye on the ball. Now, there wasn't anything he could do to keep the Titanic and Bodies exhibits from jumping ship to Luxor. But he pulled the plug on Folies Bergere and the Comedy Stop. Then, having given magician Dirk Arthur the boot, Butera's minions had to reverse field and grant the illusionist a reprieve through September. (So if you go to the Trop in April, the only entertainment offering will be an afternoon magic show. That's it.)

Just another day at the Trop.

As of Sunday, the Trop will have no (as in "zero") marquee attractions to tout. So it's an understatement to say that an agreement "in principle" with comedian Bobby Slayton doesn't come a day too soon and a formal contract needs to be inked yesterday.

When Nero played an as-yet-uninvented instrument, Rome burned. Whilst Butera fiddles, the Trop merely continues fade. Unless TropEnt's song and dance about repositioning the Trop is just a softshoe act, playing for time until the whole problem can be deposited in Yemenidjian's lap.

Ever since he took the reins at TropEnt, Butera has been fixated upon getting the Tropicana Atlantic City back (which he should) and, secondarily, with regaining Casino Aztar in Indiana (which he did). But the LV Trop has clearly been a low priorty and now he's washing his hands of it. Which means the real problem won't be Yemenidjian's but that of Trop employees and their equally neglected customers.

Patience, thy name is a Harrah's Entertainment bondholder. A surprisingly large number of these long-suffering souls are willing to wait just shy of a decade to redeem their distressed Harrah's debt. They're better men than I.

This book looks like a must-have. And, no, Huntington Press didn't publish it. But we do have a nifty new edition of Whale Hunt in the Desert, thank you for asking.

The scandal that wasn't

Wed, 25 Mar 2009 18:38:00 -0700

Like a summer storm, the hoo-ha concerning the intervention of Sens. Harry Reid and John Ensign on behalf of troubled CityCenter, blew itself out in a hurry. Once the New York Times decided to spike a story on the ethical quandary, it was pretty much over and done. About the worst charge ethics watchdogs could level at the two lawmakers was "implied pressure" and the consensus was that both Reid and (especially) Ensign had been on the square in their handling of the matter.

Sadly, it says little for either's clout -- Reid's in particular -- that, after weeks of beavering away at the banking industry, financiers haven't budged. MGM Mirage says it can fund its half of CityCenter by diverting cash from other parts of the budget, but even that's not enough to loosen any purse strings. (Dubai World's de facto sabotage of the project is the subject for a whole 'nother post.)

Ensign and Reid were in a no-win bind: Come to CityCenter's aid and be accused of exercising undue influence or do nothing and get raked over the coals (or worse) if MGM Mirage collapses under the project's weight. Treasure Island owner Phil Ruffin was particularly pithy, telling Steve Friess, "I wouldn't jump all over them. That's exactly what your senators are supposed to do."

For my part, I received a valuable civics lesson from a reader, who wrote:

"You're amazed/outraged that Sen. Harry Reid is shilling for MGM Mirage. I'm here to tell you that's exactly what politicians are expected to do -- enthusiastically front for a) their constituents in general and b) the biggest, richest, most powerful constituents in particular.

"Are you also amazed/outraged that Sen. Carl Levin, Rep. John Dingell and other members of the Michigan congressional delegation continue to shamelessly promote the interests of GM, Ford and Chrysler -- all home state companies that can't really compete with their Japanese counterparts? That Sen. Charles Schumer of New York insists on defending that homestate financial services firms that have wrecked the nation's economy?"

Point taken. As I (prophetically?) wrote someone earlier this week, I'm not so proud I don't think I can learn from my readers.

Las Vegas Sands: Abandon ship!

Tue, 24 Mar 2009 18:18:00 -0700

"Another mutineer dispatched, Admiral Adelson sailed forth to do battle with the hydrofoil fleet of Stanley Ho."

As the gilded galley that is Las Vegas Sands slowly settled deeper and deeper into an ocean of red ink, Wall Street analysts held out a slim lifeline or two. Surely, they noted, LVS' overseas construction supremo, Brad Stone, and Venetian President Rob Goldstein were still with the ship. And then there was one.

There is also only one way that Stone's March 18 departure (disclosed today) will play on Wall Street. In a word, badly. Perhaps his leap overboard was inevitable, given his long ties to outsted Sands prez William Weidner. Or maybe he didn't cotton to answering to an overcompensated newbie gaming exec (Weidner successor Michael A. Leven, aka The $2 Million Man). Either way, Stone leaves asset sales in Macao hanging fire and Marina Bay Sands in Singapore well short of the finish line.

We are presumably meant to be reassured that Sands is pondering buying back $800 million in debt, bringing its leverage down to a mere $9.7 billion (or slightly less than 14X earnings). This sort of bucket-brigade move still might save the ship but Admiral Adelson's waited until the bilge water was lapping at his ankles.

Hey, Sanford Bernstein! Aren't you glad you rated this stock a "buy"? Construction at a standstill in both Macao and on the Strip ... unimaginable debt-to-earnings ratios ... a $5.4 billion megaresort coming online in an untested market ... what's not to love?

MGM bailed out, slightly

Thu, 19 Mar 2009 18:03:00 -0700

Phil Ruffin is a true "george." He kicked up the cash portion of his Treasure Island purchase by 20%: to $600 million. That extra 100 million clams is manna in the desert for MGM Mirage, which was just downgraded again by Moody's, partly due to a shortage of cash in the till.

Incidentally, Ruffin says he's having trouble getting lenders to pony up the $175 million he needs to pay off the balance on the pirate place. It just so happens that $175 million is the amount Steve Wynn hopes to raise through his new stock offering. It's probably just a coincidence ... but Ruffin and Wynn do constitute a mutual admiration society.

"And so the curtain falls. I said, 'And so the curtain falls!'" Back in D.C., Sen. Harry Reid (D-NV) does his best "Move along, nothing to see here" shtick. Unlike Harry, I think this is a splendid time for finger-pointing.

Casino apocalypse

Thu, 19 Mar 2009 13:08:00 -0700

I'm deeply imbedded in other projects today. In the meantime, by way of In Business Las Vegas and GamingFloor.com (source of yesterday's Harrah's Entertainment time warp, too) here's the answer to the question, "How many casino failures can you pack into nine minutes?" Watch it and weep.

Death, taxes and Station Casinos

Wed, 18 Mar 2009 14:39:00 -0700

It's all but certain that the unenviable steeplechase to be the first major gaming company to declare bankruptcy in 2009 will be won by ... Station Casinos!* (On Tax Day, no less.) None of the company's three rescue scenarios does not involve some form of bankruptcy.

(* -- Unless Trump Entertainment Resorts still counts as "major" operator, but I strongly doubt it.)

Potential runner-up MGM Mirage is at least a month behind. Coincidentally or otherwise, mid-May would also mark the point at which the maw of CityCenter devours the $500 million realized in the Treasure Island sale (leaving approximately $600 million in the kitty), should that close on schedule.

Which might be A Good Thing: Another razor-sharp analytical piece from the Las Vegas Sun efficiently lays out the reasons why Chapter 11 is the worst option -- except for all the others. Not only does it keep the companies in one piece, it reduces the incentive to cannibalize capex dollars for debt servicing. Also, the prospect of facing regulatory scrutiny is daunting enough to bankers that they're inclined to keep the status reasonably quo.

Although MGM Mirage has one of the best debt-to-earnings ratios on what I'll call the Benston-Velotta Scale, short-term debt has pushed it far closer to the brink that Wynn Resorts or Boyd Gaming, both of whose ratios look slightly worse on paper ...

But not nearly as bad as the nearly 15:1 debt-to-earnings imbalance under which Las Vegas Sands is crumbling. It really makes you wonder what the Sands-loving analysts at Sanford Bernstein have been putting in their coffee. Running a close second at 13:1 is bankruptcy-bound Station, the victim of cash-flow projections that were extraordinarily far from the mark.

Taxing problems: More numbers are available on the proposed cigarette and liquor tax hikes. They're ugly but I did get a chuckle from the R.J. Reynolds lobbyist who floated the solicitous argument that tobacco taxes are bad because they're regressive. Nice try. (Altruism is not Big Tobacco's strong suit.)

I've also shamelessly swiped these market-cap comparisons, which Hugh Jackson posted today:

Barrick Gold: $27.5 billion

Newmont Mining: $18.72 billion

Wynn Resorts: $2.37 billion

Las Vegas Sands: $1.46 billion

MGM Mirage: $959 million

That's $46.2 billion for just two mining firms vs. less than $5 billion for three of the most significant casino companies. Which of these industries is in the cross hairs for an imminent Nevada tax increase? I'll give you a hint: The answer does not contain the word "mining."

Wynn(ing) Scenario: No matter what he says, people love to speculate that Steve Wynn's going to use his new stock offering to buy another casino. I'm not saying he won't ... but $175 million won't get him far, even in this market. Unless he's got a sudden hankering for the Tropicana or Riviera, that is.

Understatement of the Year

Wed, 18 Mar 2009 13:30:00 -0700

... to date anyway. Somebody at MGM Mirage has a terrific deadpan sense of humor, as indicated by the following black jest:

" ... the recession and a decline in consumer spending sent MGM Mirage to a net loss of $1.15 billion in the three-month period ended Dec. 31. MGM Mirage said a $1.2 billion noncash impairment charge also affected quarterly results."

"Also affected" by a writedown that converted a small profit to a massive loss? That's like saying somebody who was punched once and shot 55 times was "also affected" by the bullets.

Quote of the Day

Wed, 18 Mar 2009 13:16:00 -0700

"Actions have been taken to reduce costs, but we fear these actions, albeit necessary, will aggravate an already discouraged work force and further degrade properties already in need of great repair. This could have the unfortunate repercussion of alienating customers, forcing them to seek play at competitors." -- Deutsche Bank analyst Andrew Zarnett, on belt-tightening measures taken by Harrah's Entertainment.

Case Bets: Macao, Icahn, Atlantic City, MGM Mirage, Sin City Kitties

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

According to Telegraph correspondent Ben Bland, Macao finds itself in a bind. Peking's efforts to prevent money from being siphoned out of the country have crimped high-roller play, forcing a greater reliance upon mass-market customers. But the recession is cutting into their gambling budgets, too. Who's having the last laugh in all of this? Who else but Stanley Ho? As we're learning, never underestimate old Stan's ability to survive. He's probably found a loophole out of death, too. (But somebody needs to clue Bland in that Celine Dion doesn't play Vegas these days.)

Icahn's in: Well, sorta. Although the former Stratosphere owner is officially making a play for the Tropicana Atlantic City, he wants -- get this -- another six months to close the deal. Since the sale of the Trop was supposed to have been wrapped up 11 months ago, regulatory patience is finally running thin. Keeping the Trop in a 21-month limbo is grossly unfair to its long-suffering employees, too.

Icahn's equivocations could send the Trop caroming straight into the arms of Cordish Co., although it's unclear whether Cordish is still interested. Had chowderheaded, state-appointed trustee Gary Stein -- who was characteristically out of the loop on the Icahn bid -- closed the deal when deals were still to be had, all of this would be ancient history. New Jersey Casino Control Commmission members should be marched off to the woodshed for appointing Stein and then tolerating his interminable (and very expensive) bungling.

Elsewhere in New Jersey, solons have relieved Atlantic City's denizens of their second-class citizen status, albeit with many clauses and exceptions. This was accompanied by the usual howls about casinos wielding untoward influence (they can't even make political donations, which seems blatantly unconstitutional), although "juice" from other industries -- like the sacrosanct horse-racing business -- is implied to be hunky-dory. The horsey set's constant pining for slot machines gets a cold shoulder from the voting public, however.

Remember how I forecast that MGM Mirage's $1.2 billion writeoff of much of the value associated with former Mandalay Resort Group properties was going to kill 4Q08 earnings? Well, it did. However, the company supposedly still doesn't want to take on equity partners in anchor-around-the-neck CityCenter. "I'd be surprised if they dilute the joint venture [with Dubai World]," says a Reuters source. Geez, seems like if they'd "diluted" it with additional partners earlier on, they might not be hawking the family silver to raise completion money. Pride goeth before a ... well, you know.

Literacy-challenged Kitties: There's no better topless show on or off the Strip than the Sin City Kitties, who perform all the way out at Whiskey Pete's (which boasts a surprisingly spacious showroom). OK, I haven't seen Fantasy, probably because Luxor insists on advertising it as "Carrot Top Fantasy." As one wag observed, those are three words that should never inhabit the same sentence.

Anyway, Sin City Kitties is the only topless show I've seen that's predominantly erotic, as opposed to having a good number or three. And none of the girls betrayed signs of "enhancement" on the night we saw it, when it played to an appreciative audience of leathernecks and other servicemen.

However ... somebody needs to inform these pussycats that what they perform is not a "topless review [sic]" -- unless they plan to critique other topless shows from their stage in Primm.

"The Harry Reid Train": The asshat who made this fumbling attempt at an "ambush interview" might want to learn what the "Harry Reid Train" is (or more accurately, isn't) before attempting to smart-mouth Rep. Dina Titus (D-NV). Titus brushes off the uninformed oaf with the contempt he deserves. And hey, that's the "Sin City Express," bucko. Don't go messing up our catchy new brand name.

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.

Case Bets: Harrah's & Herbst

Mon, 16 Mar 2009 17:38:00 -0700

Even if Harrah's Entertainment crashes and burns (read: files bankruptcy), never fear: LBO monarchs Texas Pacific and Apollo Management will still be calling the shots. There's a lovely thought; the very guys who drove Harrah's pell-mell into the ditch -- eradicating literally billions of dollars from the balance sheets -- will retain an iron grip upon the steering wheel.

Another delighted Harrah's bondholder.

Is this what private equity has come to? Run up insupportable debts, make bondholders take a Yul Brynner haircut, and waltz away with the physical assets for pennies on the dollar? The nicest word I can think of for that scenario is "irresponsible."

The house loses: The Herbst family won't even get to keep its anchor casino on Flamingo Road under the terms of a settlement announced last week. Herbst Gaming is trying to spin it as a "win" that it's keeping it slot routes. Too bad Herbst can't have it both ways, as the company's blamed the effects of Nevada's newish smoking restrictions (and thus a decline in slot-route revenues) for much of the company's misfortunes -- something I've been hearing from inside Herbst, too.

If the bondholders are carting off the 15 Herbst casinos, it's because that's where the real money is to be made (even if it was colossally dumb of Herbst to pay nearly $350 million -- a mind-blowing 11.6X cash flow -- for a trio of run-down Primm Valley casinos).* If the slot routes are the golden goose the Herbsts now wish us to believe, no way the family would get to keep them. After all, it's the route revenues which have fallen at a steeper rate than the casino ones.

* -- even after a $67 million "goodwill" writedown, Herbst still paid a taken-to-the-cleaners 9.4X EBITDA for the Primm trio.

At least there's good news via the grapevine -- a rumor making the rounds that CEO Ferenc Szony will be staying with the casino portfolio, running the show on behalf of the creditors. Szony was brought in as Mr. Fix-It after the Herbst Brothers dug the company into an enormous hole. From what I've seen out there at Primm, he's making quite a push-back effort, even if neither the condition of the properties themselves nor Herbst's cash flows gives him the ammo he really needs. If Szony indeed gets that vote of confidence, it gives the ex-Herbst casinos a fighting chance.

Quote of the Day

Mon, 16 Mar 2009 14:56:00 -0700

"Casinos on average now owe $7 of debt for every dollar they project to earn. By comparison, the next most leveraged industries -- industrials, utilities and consumer cyclical -- are all levered at less than four times earnings, according to investment bank Houlihan Lokey Howard & Zukin.

"Some of the industry's high rollers such as Harrah's Entertainment and Las Vegas Sands owe $9 for every dollar of projected earnings." -- from today's Wall Street Journal.

Case Bets: Sands' future; Gibbons' lack of same; Hard Rock woes

Mon, 16 Mar 2009 12:00:00 -0700

An "Adelson dictatorship" no solution: With Las Vegas Sands brought to the precipice of utter ruin, this post-mortem on the William Weidner ouster hits a series of nails square on the head. Only the accompanying poll seems daffy: Given Weidner's mammoth self-regard, it's impossible to conceive of him being taken onboard at any gaming company except one that's otherwise bereft of casino expertise (like the Cosmopolitan, say) or one whose CEO suddenly gets the chop.

Weidner fallout continues: The palace coup that toppled Weidner was conducted by a rump faction of the LVS board. This minority-led putsch has prompted yet another board member to tender his resignation. In the meantime, I want some of that top-flight crack the analysts at Sanford Bernstein must be smoking, as they continue to give Sands rave reviews.

Bad Day at Hard Rock: Even without the help of one-time charges, the Hard Rock Hotel & Casino lost $101 million last year. Not only did the HRH choose a fiendishly bad time to expand (if a 130% increase in your room base can euphemistically be called "expansion"), the construction disruption has driven customers away. Having marched itself and banker/hostage DLJ Merchant Partners into this quagmire, Morgans Hotel Group really needs a 4Q09 economic turnaround or it's screwed.

The jacked-up hotel tax that Gov. Jim Gibbons alternately did and didn't support has motivated yet another challenger for the GOP nod in 2010. Former state Sen. Joe Heck, M.D., cleared his guns last year -- from the front lines in Iraq, no less (Dr. Heck was doing a brief tour of duty) -- when he called out Midnight Jim for his catastrophic lack of leadership during the hepatitis C crisis. So his announcement comes as a less-than-complete surprise.

This is good news for Sen. Harry Reid (one more potential challenger removed from a thinly populated chessboard), not so good for son Rory Reid, who's thought to be the Democratic frontrunner for Gibbons' seat. As for that room tax, not only would Gibbons not sign that tax increase whose revenues he covets, he actually went into hiding. Really.

If this doesn't end the political career of Midnight Jim, nothing will. Never mind the lost productivity that will be entailed if all DMV visits have to be made during the normal work week. For a Nevadan, a visit to the DMV is more dreaded than root canal without anesthetic. And a DMV with fewer hours and fewer workers? You do the math.

WTF?!?!? "Local media has speculated that the world's casino giants would pour money into Penghu [Taiwan] having suffered a hammering elsewhere in the global financial crisis." Local media needs to get a grip.

The mystery of James Packer

Fri, 13 Mar 2009 11:26:00 -0700

Lawrence Ho and James Packer bet the farm on City of Dreams.

If you can endure the small print, The Australian Business takes an in-depth look at the simultaneously waxing and waning fortunes of James Packer. Compared to what's portrayed as savvy handling of his media and livestock portfolios (he's selling the latter for 17X [!] EBITDA), it's a through-the-looking-glass story with regard to Packer's casino investments. There, his business acumen appears to have deserted him altogether.

A Packer associate's statement, "He's a tremendously disciplined person ... I think he's a bit of a deal perfectionist," doesn't square with the series of dead-end casino investments Packer's made in the North America, coupled with his impulse to buy in at the top of the bubble.

There may be a couple of drafts of wind beneath the wings of Crown Ltd. A slowdown in Macao means that Melco Crown Entertainment's City of Dreams will be 2009's sole megaresort opening in that market. Australian punters, meanwhile, can look forward to $590 stimulus checks from their guvmint, much of which is expected to flow into Crown's casinos -- and coffers. But across the Pacific, Packer's Canadian casinos are ailing and ...

Stop the presses! Packer is slamming the brakes on the Cannery Casino Resorts deal, paying $370 million for the privilege of punting the acquisition two years down the road and maybe clear out to sea. If it's the latter, he could wind up paying $660 million with only a 4% stake to show for it, once breakup fees are factored into the equation.

In the near term, there are several upsides. Cannery bosses William Paulos and William Wortman get to hang onto Pennsylvania's #1 revenue-per-slot racino, which is on the brink of expansion. Indeed, they could but scarce contain their glee. Crown shares leapt upward and Packer now has the option of rolling his downpayment into a minority (25%) share of Cannery.

Paulos and Wortman don't have to sue Crown and stick in the mud Gretel Packer for scuppering the deal -- and the unnamed trustees who constituted three big spanners in the works turn out to be Ms. Packer's three little kids. This revelation should go a long way toward satisfying Pennsylvania regulatory concerns. On that front, the clock continues to run, as the new Packer/Paulos-Wortman accord gives Crown 90 days to complete the regulatory-approval process.

The funniest line in the news coverage has to be "a complete collapse of the deal would have tarnished [Crown's] reputation in the tight knit US casino industry." Because it's not like Crown's escutcheon is all shiny-like, what with $455 million worth of anvils tied around its neck in the form of written-off grubstakes in Harrah's Entertainment, Station Casinos, Crown Las Vegas, not to mention an ongoing commitment to mastodonic Fontainebleau.

No what to with all that money from Packer's Down Under real estate play? It's said young Packer "didn’t have to sell, but he could see better places for his interest, to put his money." There sure are ... like Trump Entertainment Resorts or the Cosmopolitan and maybe the former Herbst Gaming empire, or perhaps bits and pieces of that disintegrating edifice known as Las Vegas Sands.

Meanwhile it's a happy day indeed at Cannery HQ, what with $50 million of Crown's money in the kitty, free and clear, plus hundreds of millions more sitting in escrow, plus a blue-sky future in Pennsylvania. Break out the bubbly, Bill and Bill!

Another downbeat quarter for struggling Shuffle Master. Considering the uninspiring succession plan for the post-Yoseloff era, is it too soon to say "takeover target"?

What's the future of Las Vegas Sands now that CEO Sheldon Adelson has dissident executives on the run and is exuding optimism that even Dr. Pangloss might deem over the top? (To say nothing of the revelation that many key shots are being called by Mrs. Adelson.) I consulted the utterances of the prophet Stewie Griffin, as found in Family Guy I:2, and beheld these words: " ... partly cloudy with a chance of doom!"

Adelson: Everything is A-OK

Thu, 12 Mar 2009 12:25:00 -0700

Las Vegas Sands' CEO has been quite the Chatty Cathy of late, feeling emboldened by his disposal of ex-deputy William Weidner, no doubt. The Associated Press' Oskar Garcia caught up with mogul in New York, sounding like he'd read a few too many of his own press clippings: "The difference between us and you guys [Wall Stret] is that we believe what we say. Apparently the market doesn't believe us." A $1.62 share price definitely constitutes disbelief.

If Sands succeeds in cutting $470 million from its budget this year, Adelson says, "there's no need for us to go out and sell assets." Even so, he's entertaining two buy-in offers, he says, two inquiries about the availability of Sites 5 and 6 on the Cotai Strip™ and as many 19 bids on one or another of two malls he's building in Macao -- all of which should be soothing music to investors' jangled ears.

Matters, Adelson said, are better than ever now that he's shot of Weidner, proclaiming, "Don't think that we have one foot in the pail of bankruptcy and the other on a banana peel in the middle of a hurricane. That's not the case."

I feel better now. Don't you?

Adelson vs. Weidner: The dog fight

Tue, 10 Mar 2009 13:15:00 -0700

"The guy who put the whole thing together is now going to work with somebody else." -- Sheldon Adelson, referring to himself in the third person.

What better way for William Weidner to get back at ex-boss Adelson than to chat up John L. Smith, upon whom Adelson had been inflicting considerable misery of late?

How President-in-waiting Michael Leven will fare in Weidner's wake is an intriguing question. Leven is used to being his own boss and now he'll be having to answer to Adelson. And, as Smith points out, his hands-on casino experience is zip. At least five years on the Las Vegas Sands board should give him some considerable idea of what to expect -- and how big the challenges are that face him.

Proving himself an ingracious winner, Adelson heaped praise upon himself at an appearance in New York. He also gloated vis-a-vis Weidner, "We helped him resign a little bit." Except for Mrs. Adelson, "Nobody's indispensable." Whatta guy.

Stock analysts meanwhile questioned the survival prospects for LVS' international prexy, Brad Stone, and those of senior veep Rob Goldstein. With the free-spending Adelson firmly entrenched and the possibility of a Sands brain-drain in the offing, the company's survival prospects have taken a turn for the bleaker.

But the change was inevitable. It's difficult to conceive of a company in which the CEO and his executive team are openly at war with each other being able to function. That mediation committee of board members never looked like anything more than a Band-Aid or, as analyst Robert LaFleur puts it with masterful understatement, "Apparently that didn't work out so well."

We may indeed be seeing "a junkyard dog fight," as Weidner once put it. But does anybody have a dog in this particular fight?

(The Las Vegas Review-Journal has a Weidner-themed slide show, but it's more interesting for the Benjamin Button-like metamorphosis of Adelson himself, whose hair grows darker and more abundant the older he gets.)

Update: The incoming Leven gets a sideswipe from Howard Stutz, who describes him as "a veteran hospitality executive who most recently ran the Georgia Aquarium in Atlanta." (Quoth Stewie Griffin, "Oh, ba-ZING!")

Even if Leven is, as Adelson says, "probably one of the most well-known and well-liked operations guys in the entire industry," his age (71) does not portend a Weidner-like tenure in the position. Does Adelson have a Plan C?

Weidner out!

Mon, 09 Mar 2009 13:25:00 -0700

Not anymore he's not.

Starting April Fools' Day, Las Vegas Sands will have a new president and COO. Michael A. Leven is replacing William Weidner, who left abruptly over the weekend. While Weidner and CEO Sheldon Adelson used to speak with one voice, recent SEC filings hinted at a falling-out between the two, leading to the formation of a special committee to mediate their differences.

The Sands' prexy's position had been decreasingly tenable ever since LVS lost a lawsuit filed by Chinese businessman Richard Suen. At trial, Weidner performed badly on the stand despite being granted leeway to testify off of prepared notes. More damaging still was Adelson's admission, under oath, that Weidner had breached his fiduciary duties to LVS in his dealings with Suen. Once the schism between Adelson and Weinder (and other Sands top brass) became public, it was a relatively short dance to the killing ground.

So the power struggle is, for the time being, over and Adelson has won. New president Leven is a former hotel exec and a member of the executive committee that was formed Oct. 29 of last year. A five-year veteran of the LVS board, he hasn't held a managerial role there ... until now. We wish him luck.

It's difficult to imagine the bombastic and tactless Weidner catching on with another major casino outfit -- but life is full of surprises. Other Weidner allies at Sands HQ might want to start looking for the nearest exit, too.

Update: Wall Street delivered its verdict on the Weidner's exit -- in the form of a 20% drop in Sands' already emaciated stock price. Since Weidner was perceived the countervailing force to Adelson's damn-the-torpedoes approach, the Street's concerned is well warranted. J.P. Morgan analysts also noted that "also opens the door for questions regarding the continued employment of Brad Stone, a 30+ year colleague of Weidner."

Smoky Station

Mon, 09 Mar 2009 01:41:00 -0700

Smoke gets in your eyes ... and your nostrils ... and all up in your business the instant you pass through the doors into Sunset Station. This was the overriding impression left by a Saturday-night visit and it was quite a striking contrast to the older Hooters, which I expected to be smoke-ridden but wasn't. Sunset Station, contrarily, seems to be aspiring to be the second coming of Nevada Palace. This is a recent and unwelcome phenomenon, suggestive of severe maintenance cutbacks and, just perhaps, an underlying assumption that people either won't notice or just won't care.

That's what really reeked when it became obvious that the Harrah's Entertainment and Station Casinos LBOs were going to go through. Because inadvisable debt loads aren't the customers' problem per se. But in order for those newly overburdened companies to make their nut, particularly when it came to debt servicing, it was obvious that customer service, comping and maintenance were going to take it in the neck. Which is, by all accounts, what's happening. But with companies sky-high on cheap credit and banks gleefully playing the role of the neighborhood pusher, high-risk deals were getting made left and right back then (circa 2006) because so many circumstances conspired to 'enable' -- nay, encourage -- them.

At least the downward march of Sunset Station toward grind-joint status is still reversible. And the smell of smoke is a temporary annoyance ... unlike the tooth-grinding dissatisfaction that was tonight's (in)conclusion of The L Word. Oh, the waste, the Indian-giving, the sucktacular-ness of it!