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.
