We'd like to talk to your little birdie, 'cause your feathered friend knows more than we do.
Owner Don Barden's office couldn't be reached and two calls to Terry Caudill, owner of Binion's Gambling Hall & Hotel and the Four Queens Hotel and Casino, went unreturned. Caudill's non-responsiveness could mean that a deal is in the works, because it's been our experience that companies clam up if there's a sale brewing, but are quick to shoot down any rumors that are unfounded.
Barden's motive for bailing out of the Vegas market is a $780 million 5,000-slot Majestic Star casino he's building in Pittsburgh. Barden's had difficulty getting funding and will have to put some equity of his own into the "slot parlor" (as casinos in Pennsylvania are genteelly known). Initially called Esplanade, Barden's big-budget casino project is currently under construction on the former site of a power plant near Heinz Field and PNC Park, homes of the Steelers and Pirates, respectively.
On May 6, Standard & Poors announced that Barden needed to increase his equity stake in the project and would do so to the tune of $35 million. How? By selling Fitzgeralds. S&P analyst Ben Bubeck disclosed to the Pittsburgh Tribune that the sale would take place by May 2009. Added the Pittsburgh Post-Gazette, "To help bolster the financing, Mr. Barden has pledged to sell his Fitzgeralds Casino in downtown Las Vegas and to set aside $35 million to make debt service payments in the first year of the North Shore slot parlor's operation if the money isn't required for the construction itself."
CB Richard Ellis Executive Vice President John Knott told the Las Vegas Review-Journal that getting Barden's asking price -- or more -- ought to be a breeze. "I think $35 million for Fitzgeralds would be a bargain. The line would form behind me." After all, Caudill himself had recently plunked down $32 million for Binion's, a property in far worse straits, physically and financially, than the Fitz.
Barden could scare up more capital by selling a downtown Las Vegas office building that he bought for $13.5 million two years ago. At the time, Barden intended it to serve as the hub of his growing five-casino mini-empire, but his gaze quickly shifted to Pittsburgh.
Ironically and prophetically, Barden said when he purchased the 302 Carson Ave. tower that "he had many dreams -- but not the available capital to fulfill them all," according to the Las Vegas Business Press. He also questioned "the probity of building casino facilities whose scale and amenities would go well above and beyond what Pennsylvania actually mandates." (A rival Harrah's Entertainment-backed project was budgeted at $512 million, compared to Majestic Star's projected cost of $450 million.) Barden won the Pittsburgh casino concession despite scoring only 274 out of a possible 600 on a rating scale devised by Pittsburgh's city planning department. (Harrah's and its Forest City partners notched a 388 and Isle of Capri Casinos scored a 317.)
Compounding a situation rife with ironies, one of Barden's financiers is Apollo Strategic Value Fund, an offshore private-equity fund owned by Apollo Management, part-owner of...Harrah's. Having been barred from the front door, could Harrah's get into the Pittsburgh market via the rear? "If in fact this is the way it works out, it could prove to be a very shrewd move by Harrah's," Spectrum Gaming Group Vice President Joe Weinert told the Post-Gazette. "It could prove to be a win-win for Barden and Harrah's."
Some Barden detractors, notably Pennsylvania state Sen. Jim Ferlo, have voiced unease about Barden's finances and even raised the prospect of re-bidding his casino license. But his supporters, who include Gov. Ed Rendell, are mostly sanguine. They note that steel and concrete are rising on Barden's site, while two casinos planned for Philadelphia haven't begun to start construction, mired as they are in zoning issues.
