Gaming Board on Tuesday is expected to delve into the money details

November 24, 2008

Once viewed as a cash cow that could fetch well over half a billion dollars and save the state budget, Illinois’ only available casino license is being pursued by three companies offering far less, and industry analysts say even those cut-rate numbers may not hold up in the sagging economy.

“It’s very bad timing for Illinois,” said Bill Eadington, director of a gambling institute at the University of Nevada-Reno. “We’re facing the biggest economic recession in 75 years. I wouldn’t be surprised if the companies that made bids a couple months ago could no longer justify them.”

The Illinois Gaming Board is expected to delve into the money details Tuesday when it hears from casino operators hoping to set up shop in Des Plaines, Rosemont or Waukegan using the state’s long-in-limbo 10th and final license.

Those three outfits are asking to be dealt in as the gambling industry finds itself mired in a depressed market. Once driven to expand into places like Chicago, casino companies now are suffering from plummeting stock prices and the high cost of debt required to build and open casinos.

Across the country, major players are walking away from the table.

Harrah’s Entertainment recently cited financial concerns in nixing plans for a Kansas casino. In Indiana, Nevada-based Eldorado Resorts just dropped a bid to buy Casino Aztar in Evansville because of a problem in securing financing.

If larger casino operators are having cash-flow problems, Eadington said, then that likely doesn’t bode well for smaller companies that may be hit harder by the worldwide credit crunch—the types of companies bidding for Illinois’ license.

The finalists are Trilliant Gaming, a Los Angeles-based venture that has teamed up with Rosemont and submitted the high bid of $435 million. The next highest offer is $225 million from Waukegan Gaming. A distant third at $100 million is Midwest Gaming & Entertainment, billionaire developer Neil Bluhm’s group, who wants to open in Des Plaines. Those figures don’t include the cost of building the casino, which could be in the hundreds of millions, making it tougher to turn a profit.

“I would say that the Rosemont bid is so high against the rest that you wonder how they are going to get there, but at the same time I know the Des Plaines bid is much lower than last time around,” said state Rep. Lou Lang (D-Skokie), referring to when the license was last up for bid in 2004.

The Gaming Board declined to release details about how the three bidders would raise the money to back up their offers. Representatives for the companies hoping to open in Waukegan and Rosemont declined to comment before Tuesday’s meeting, while Des Plaines representatives could not be reached for comment.

Gaming Board officials have said their decision will be based on more than the initial offer price, and companies will be able to alter their bids. Lang said he expects the state to take a hit on the license price, but hopes the board is looking long-term.

“I am much more interested in permanent revenue, a casino’s ability to sustain revenue moving forward,” said Lang, the House Gaming Committee chairman. “The fact that one company’s down payment may be larger doesn’t convince me.”

The winner will open its doors facing a 50 percent tax rate and casino revenues already down in Illinois because of the economy and a new indoor smoking ban.

“Consumer spending is having an impact on gaming. It’s more vulnerable to economic changes than most other industries,” said Keith Foley, senior vice president of Moody’s Investors Service.

“We’re seeing major declines, and people should be afraid to assume that it’ll all just rebound and come back to where it once was. Gaming simply hasn’t been around long enough in most places to hope that this is just a cycle and casinos will bounce back.”

Story by : mcgarcia@tribune.com

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Harrah’s Gaming says it won’t build its planned $500 million casino and resort near Mulvane, the Kansas Lottery said Monday.

In a news release, the lottery says a representative from the casino development company informed the agency of its decision this afternoon in a letter.

Jeffrey Ungerer, of Sumner Gaming Joint Venture, wrote: “We truly regret that we must withdraw our gaming application as a result of circumstances beyond our control that do not permit us to meet the proposed schedule for the project. In the event the financial climate improves, we may be interested in reapplying for a gaming license should the process in the South Central zone be reopened for bids.”

Harrah’s teamed with a Topeka development firm on its project near Mulvane. The investment group, Sumner Gaming, was one of four that applied for a casino license in Sumner County under a 2007 expanded gambling law.

But after Sumner Gaming was selected as the state’s preferred developer in Sumner County, the national economy has deteriorated. Financing for development projects has gotten difficult to obtain as the nation’s financial institutions have struggled.

“We are, of course, disappointed that Harrah’s has withdrawn its plans for a casino in Sumner County for financial reasons,” said Kansas Lottery Executive Director Ed Van Petten in a statement. “They tell us it is not feasible for them to move forward with the project at this time, and we have to respect their decision. The lottery will be taking steps to re-open bids in the South Central zone. While this is a challenging time for the gaming industry as a whole, we believe a gaming facility in Sumner County will eventually become a reality.”

The state’s gaming law, which took more than a decade for the Legislature to pass, was designed to spur economic development and generate state tax revenues by permitting four “destination” casinos in Kansas. But the law has struck tough times. Already, Penn National Gaming has backed out of plans to build a casino near Pittsburg.

Other casinos are planned near Kansas City, Kan., and Dodge City.

The lottery plans to solicit new developers for both the Pittsburg and Sumner County areas.

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RENO, Nev. - Monarch Casino & Resort Inc., the owner of the Atlantis Casino Resort Spa in Reno, Nev., said Wednesday its net profit in the third quarter fell 50 percent as revenue sank and promotional giveaways crept higher.

Net profit fell to $4 million, or 25 cents per share, from $8 million, or 41 cents per share, in the year-ago quarter. Net revenue dropped 11 percent to $38.8 million from $43.6 million.

Analysts surveyed by Thomson Reuters expected earnings per share of 21 cents and revenue of $38.5 million.

Casino operating expenses grew 8.2 percent to $10 million, due largely to the giveaway of free food, drinks and other services to patrons.

Chief Executive John Farahi cited the weak economy in Northern Nevada for revenue shrinkage while profits were hurt by “aggressive marketing and discount programs initiated by our competitors.”

Shares of Monarch Casino slipped 10 cents to close at $6.70.

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The gaming industry was long thought to be recession proof

Southeastern Connecticut is gearing up to deal with a huge economic dislocation as Foxwoods casino lays off 700 workers.

The gaming industry was long thought to be recession proof, but the latest downturn is beginning to take its toll. After Mohegan Sun’s decision to delay its expansion plans comes the news that Foxwoods will lay off about six percent of its workforce. The Eastern Connecticut Workforce Investment Board has dealt with many large scale layoffs in the region, helping to place or retrain affected workers. But the Board’s director John Beauregard says this one is daunting.

“Reabsorption will definitely be a challenge, especially with the economy the way it is right now. That number of 700, if indeed it does stay at that level, ranks among the largest that we’ve dealt with in a decade or so. I think we would have to go back to some of the layoffs we experienced during defense downsizing to hit those kinds of numbers.”

The Mashantucket Pequot tribe, the owners of Foxwoods, have said the layoffs will come across the board, affecting both hourly employees and management. The layoffs will be staggered over the next two weeks. It’s just four months since Foxwoods opened its new MGM Grand expansion, which resulted in 2 thousand new jobs.

No Comments Yet »

Gaming Board on Tuesday is expected to delve into the money details

November 24, 2008

Once viewed as a cash cow that could fetch well over half a billion dollars and save the state budget, Illinois’ only available casino license is being pursued by three companies offering far less, and industry analysts say even those cut-rate numbers may not hold up in the sagging economy.

“It’s very bad timing for Illinois,” said Bill Eadington, director of a gambling institute at the University of Nevada-Reno. “We’re facing the biggest economic recession in 75 years. I wouldn’t be surprised if the companies that made bids a couple months ago could no longer justify them.”

The Illinois Gaming Board is expected to delve into the money details Tuesday when it hears from casino operators hoping to set up shop in Des Plaines, Rosemont or Waukegan using the state’s long-in-limbo 10th and final license.

Those three outfits are asking to be dealt in as the gambling industry finds itself mired in a depressed market. Once driven to expand into places like Chicago, casino companies now are suffering from plummeting stock prices and the high cost of debt required to build and open casinos.

Across the country, major players are walking away from the table.

Harrah’s Entertainment recently cited financial concerns in nixing plans for a Kansas casino. In Indiana, Nevada-based Eldorado Resorts just dropped a bid to buy Casino Aztar in Evansville because of a problem in securing financing.

If larger casino operators are having cash-flow problems, Eadington said, then that likely doesn’t bode well for smaller companies that may be hit harder by the worldwide credit crunch—the types of companies bidding for Illinois’ license.

The finalists are Trilliant Gaming, a Los Angeles-based venture that has teamed up with Rosemont and submitted the high bid of $435 million. The next highest offer is $225 million from Waukegan Gaming. A distant third at $100 million is Midwest Gaming & Entertainment, billionaire developer Neil Bluhm’s group, who wants to open in Des Plaines. Those figures don’t include the cost of building the casino, which could be in the hundreds of millions, making it tougher to turn a profit.

“I would say that the Rosemont bid is so high against the rest that you wonder how they are going to get there, but at the same time I know the Des Plaines bid is much lower than last time around,” said state Rep. Lou Lang (D-Skokie), referring to when the license was last up for bid in 2004.

The Gaming Board declined to release details about how the three bidders would raise the money to back up their offers. Representatives for the companies hoping to open in Waukegan and Rosemont declined to comment before Tuesday’s meeting, while Des Plaines representatives could not be reached for comment.

Gaming Board officials have said their decision will be based on more than the initial offer price, and companies will be able to alter their bids. Lang said he expects the state to take a hit on the license price, but hopes the board is looking long-term.

“I am much more interested in permanent revenue, a casino’s ability to sustain revenue moving forward,” said Lang, the House Gaming Committee chairman. “The fact that one company’s down payment may be larger doesn’t convince me.”

The winner will open its doors facing a 50 percent tax rate and casino revenues already down in Illinois because of the economy and a new indoor smoking ban.

“Consumer spending is having an impact on gaming. It’s more vulnerable to economic changes than most other industries,” said Keith Foley, senior vice president of Moody’s Investors Service.

“We’re seeing major declines, and people should be afraid to assume that it’ll all just rebound and come back to where it once was. Gaming simply hasn’t been around long enough in most places to hope that this is just a cycle and casinos will bounce back.”

Story by : mcgarcia@tribune.com

No Comments Yet »

Harrah’s Gaming says it won’t build its planned $500 million casino and resort near Mulvane, the Kansas Lottery said Monday.

In a news release, the lottery says a representative from the casino development company informed the agency of its decision this afternoon in a letter.

Jeffrey Ungerer, of Sumner Gaming Joint Venture, wrote: “We truly regret that we must withdraw our gaming application as a result of circumstances beyond our control that do not permit us to meet the proposed schedule for the project. In the event the financial climate improves, we may be interested in reapplying for a gaming license should the process in the South Central zone be reopened for bids.”

Harrah’s teamed with a Topeka development firm on its project near Mulvane. The investment group, Sumner Gaming, was one of four that applied for a casino license in Sumner County under a 2007 expanded gambling law.

But after Sumner Gaming was selected as the state’s preferred developer in Sumner County, the national economy has deteriorated. Financing for development projects has gotten difficult to obtain as the nation’s financial institutions have struggled.

“We are, of course, disappointed that Harrah’s has withdrawn its plans for a casino in Sumner County for financial reasons,” said Kansas Lottery Executive Director Ed Van Petten in a statement. “They tell us it is not feasible for them to move forward with the project at this time, and we have to respect their decision. The lottery will be taking steps to re-open bids in the South Central zone. While this is a challenging time for the gaming industry as a whole, we believe a gaming facility in Sumner County will eventually become a reality.”

The state’s gaming law, which took more than a decade for the Legislature to pass, was designed to spur economic development and generate state tax revenues by permitting four “destination” casinos in Kansas. But the law has struck tough times. Already, Penn National Gaming has backed out of plans to build a casino near Pittsburg.

Other casinos are planned near Kansas City, Kan., and Dodge City.

The lottery plans to solicit new developers for both the Pittsburg and Sumner County areas.

No Comments Yet »

RENO, Nev. - Monarch Casino & Resort Inc., the owner of the Atlantis Casino Resort Spa in Reno, Nev., said Wednesday its net profit in the third quarter fell 50 percent as revenue sank and promotional giveaways crept higher.

Net profit fell to $4 million, or 25 cents per share, from $8 million, or 41 cents per share, in the year-ago quarter. Net revenue dropped 11 percent to $38.8 million from $43.6 million.

Analysts surveyed by Thomson Reuters expected earnings per share of 21 cents and revenue of $38.5 million.

Casino operating expenses grew 8.2 percent to $10 million, due largely to the giveaway of free food, drinks and other services to patrons.

Chief Executive John Farahi cited the weak economy in Northern Nevada for revenue shrinkage while profits were hurt by “aggressive marketing and discount programs initiated by our competitors.”

Shares of Monarch Casino slipped 10 cents to close at $6.70.

No Comments Yet »

The gaming industry was long thought to be recession proof

Southeastern Connecticut is gearing up to deal with a huge economic dislocation as Foxwoods casino lays off 700 workers.

The gaming industry was long thought to be recession proof, but the latest downturn is beginning to take its toll. After Mohegan Sun’s decision to delay its expansion plans comes the news that Foxwoods will lay off about six percent of its workforce. The Eastern Connecticut Workforce Investment Board has dealt with many large scale layoffs in the region, helping to place or retrain affected workers. But the Board’s director John Beauregard says this one is daunting.

“Reabsorption will definitely be a challenge, especially with the economy the way it is right now. That number of 700, if indeed it does stay at that level, ranks among the largest that we’ve dealt with in a decade or so. I think we would have to go back to some of the layoffs we experienced during defense downsizing to hit those kinds of numbers.”

The Mashantucket Pequot tribe, the owners of Foxwoods, have said the layoffs will come across the board, affecting both hourly employees and management. The layoffs will be staggered over the next two weeks. It’s just four months since Foxwoods opened its new MGM Grand expansion, which resulted in 2 thousand new jobs.

No Comments Yet »