Eight days of vacation have left me deep in the hole, research-wise, so I hope you’ll forgive the slender output of recent days whilst I plough through dozens — if not a hundred or more — of unread news stories, analyst reports, etc. In the meantime …
… the tragicomic fable of Harrah’s Margaritaville continues, with scant hope held out for a restart by 2015 or even 2020. Even hopelessly stalled Las Vegas projects like Sheldon Adelson‘s St(ump) Regis haven’t taken down their construction cranes, as Margaritaville has done.
The article begs the question of why Harrah’s Entertainment thought it could undertake a $700 million megaresort right on the heels of an LBO that left it drowning in debt. It didn’t make sense then or now, although Harrah’s management exuded (unfounded) optimism back then that it could just borow, borrow, borrow and spend, spend, spend, with never a care as to when the bill would come due.
The literal money quote comes from Wells Fargo Securities analyst Dennis Farrell: “I think that project was initially conceived at the beginning of the buyout. Then they saw their bottom line shrink.”
Yeah, debt servicing on $31 billion has a funny way of doing that. The comic part of this whole debacle is that it makes Harrah’s braintrust look dumb as a box of rocks. However, there’s nothing funny about raising the hopes of the hard-hit burghers of Biloxi in this fashion, only to crash them again. There’s the tragedy.
