That’s Bloomberg, bearing the dire news that casino junk-bond debt is “generating the worst return for investors as companies from … Harrah’s Entertainment Inc. to Herbst Gaming Inc. risk bankruptcy under the weight of their debt.” With a return of 10%, casino junk bonds “are the biggest losers this year.”
Who knew? “It was viewed very much as a safe haven,” says one portfolio manager, referring to an industry long perceived as recession-proof — a bubble that has burst this year. Aforesaid manager has seen his company take a bath on Donald Trump‘s casino debt, and is foreswearing taking on any Harrah’s or Station Casinos bonds, given the size of their respective debt loads.
Other clunkers are identified as Columbia Sussex (whose debtholders want CEO William J. Yung III‘s head on a platter), Greektown Casino (scrambling to keep its license) and Herbst Gaming, which has received a “going concern” notice from Deloitte & Touche, and whose debt is plunging in value.
In the cases of Harrah’s and Station, one of the rationales for privatization was that it would enable the companies to pursue new development at their own discretion, without having to answer to Wall Street. Instead, each is handcuffed. Given the evidence of market glut on Las Vegas’ locals scene, maybe it’s best for Station that there will be a four-year lull after Aliante Station opens. But it’s a shame that the company’s push into the Reno market — one that could use new product of Station-level quality — is now on indefinite hold.
$1 billion for the Trop? Although that nice, round number was floated by Larry Klatzkin recently, there’s no evidence (yet) that the New Jersey Casino Control Commission has cracked the “B” mark in its attempts to re-sell the once-lucrative resort. And while Tropicana Entertainment co-President Scott Butera may scapegoat Garden State regulators for not getting a higher price point for the Trop, one analysis places the blame for the mammoth hotel-casino’s reduced curb appeal on Columbia Sussex’s reign of error, which cratered revenues at the property. That erratic interregnum certainly infuriated a veteran regulator, who takes a few swings at ‘ColSux’ on his way out the door, saying “They flunked Casino Management 101, as far as I’m concerned.”
Third time’s the charm. Two general managers fled Casino Aztar during Columbia Sussex’s first year of ownership. Now a third has jumped ship … but merely to another ColSux operation. Considering that Mike Jones was back in Lake Tahoe by the time the news broke, and that he used to be Bill Yung’s GM of the MontBleu and Horizon casinos there, one’s best guess would have to be that he’s been putting in charge of turning those two around (especially the embattled Horizon), but I’ll let you know for certain as soon as I do.
No official announcement has yet been made. (But you can find the settlement of the Columbia Sussex/Park Cattle litigation, posted under a rather odd link.)
Steve Friess continues to poll his readers on the coolest names in Vegas. Interestingly, nobody has yet voted for Ka, the narrative-driven Cirque du Soleil show directed by Robert LePage that even Cirque-skeptics like myself can enjoy. But apparently there is no “Ka” in “cool.”
It reminds me of one of the most famous lines from Stargate SG-1 (in the episode, “The First Ones”), where we learn that the primitive race of Unas express their displeasure with vehement utterances of “Ka!”, prompting the ever-patient Dr. Daniel Jackson to reply, “Now don’t say ‘ka!’ until you’ve tried it.”
