Casino News Today

Uncertainty over Mainland and Macau government policy contributed to the decision by Las Vegas Sands Corp to halt work on a 3.7 bln usd casino complex, the South China Morning Post reported, citing the company’s president and chief operating officer William Weidner.According to the newspaper, Weidner said it would not be prudent to put more money into the project until the central government’s attitude towards Macau becomes clearer.

Sands has already spent 1.16 bln usd on the project and will pay a further 881 mln usd to prepare it for suspension and settle outstanding payments to contractors and suppliers, the newspaper said.

‘There have been some changes in the central government’s attitude towards Macau … we don’t think it’s necessarily all that prudent to put more money in until we see how that attitude works its way out,’ the Hong Kong newspaper quoted Weidner as saying.

Las Vegas Sands  said last week it would lay off up to 11,000 construction workers in Macau after the financial crisis forced it to suspend the building of a 6,400-room resort opposite the Venetian.

However, regulatory uncertainty in Macau appears to have partly driven the decision as the company said work would proceed on a five bln usd casino resort in Singapore, the newspaper noted.

Weidner added that Macau’s policy missteps and lax regulation of the gaming industry share the blame for projects being delayed or shelved.

Forbes

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Q: Are casino stocks cheap or expensive at current prices?

A: The slowing economy and plunging stock market seem to be taking the gambling bug out of investors.

Shares of companies that run casinos, including those with well-known properties on the Las Vegas Strip, have been among the worst performers in the bear market.

Shares of MGM Mirage (MGM) were down 87% through Wednesday, while Las Vegas Sands (LVS) shares were down 94% and Wynn Resorts (WYNN) stock was off 67%.

The casino operators are facing a litany of well-documented problems. The problems started when oil prices spiked and caused airlines to fail or reduce service to Las Vegas, resulting in higher fares.

Usually Las Vegas can make up for that by courting visitors from Southern California. But higher gasoline prices made the drive more costly, and the rise of Native American casinos in California is diverting traffic from Vegas.

And things only got worse. The housing meltdown in Las Vegas hurt many residents, which hurt the “locals” gambling marke, just as the housing meltdown nationwide, rising unemployment and weak consumer confidence further reduced the willingness to gamble.

With the Dow Jones industrial average jumping or falling by triple digits daily, why gamble in Vegas?

Finally, the credit crunch has been brutal for Las Vegas. Several building projects have been stalled as builders have trouble getting loans to complete construction. And casinos face more challenges servicing their debt as visitors dry up.

With all these concerns, it’s clear the value of casino stocks needed to be brought down to match the new reality.

But to address your question, what are the valuations? Investors generally decide whether a stock is expensive or cheap based on the price-to-earnings ratio, or P-E.

The P-E can be measured many ways, but here are the numbers from Standard & Poor’s Capital IQ, based on the casinos’ earnings the past 12 months. The industry average is 10.4:

Wynn Resorts, 15.5; Las Vegas Sands none, it lost money; MGM Mirage, 4.1.

If you’ve got money you can afford to lose, and you’ve done your research, you could bet on rebound. But when?

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Allegations are ‘wild speculation,’ company says

Greektown Casino is expected to run out of cash in December, hampering its ability to continue operating or to finish building its new hotel, which is slated to open in February, according to documents filed by the Michigan Gaming Control Board.

The board that oversees Detroit’s three casinos filed documents in U.S. Bankruptcy Court on Friday asking that a judge deny the casino’s request for a 60-day extension to file a plan to exit bankruptcy.

“No reasonable person can believe that this 60-day period will markedly change the debtors’ refinancing or sale prospects except to diminish them due to continued deterioration of its operations and the credit markets,” according to the documents.

In court documents, the board alleges that the casino’s financial position is deteriorating at an alarming rate and that the casino will not be able to file a viable plan of reorganization. That deterioration will increase the likelihood that the board will put the casino up for sale, revoke its license or deny its renewal. The casino’s license expired in August.

The board has the power to appoint a conservator to run the casino and direct the sale of the property if a casino license is not renewed, or is revoked or
suspended, it said in court documents.

The Gaming Control Board’s motion was one of several filed Friday objecting to the casino’s request to extend a deadline to file a bankruptcy exit plan.

In response to those, attorneys for Greektown filed a motion Sunday in support of an extension, claiming that allegations against Greektown are false and misleading.

Greektown Casino spokesman Roger Martin today called the allegations that Greektown was running out of money “wild speculation.”

“It’s just not true,” he said.

In documents filed Friday, the board alleged the following:

• Greektown will need additional lending or equity to both continue operations — including paying regulatory fees of both the state and the city — and to complete the hotel.

• The casino failed to meet its financial projections and the financial covenants required by both the board and Debtor in Possession financing. This has created a significant cash problem for Greektown.

• The casino is expected to continue violating financial benchmarks through 2011.

• Conway MacKenzie & Dunleavy, a financial consulting firm that advises Greektown, has told a board analyst that Greektown cannot guarantee that it will have sufficient cash to pay construction costs after December.

• Greektown has been in regulatory breach for almost eight months and has recognized that it would be in default for two years with no projected end in sight.

• Over the next four months, the casino must generate $22.3 million in order to complete construction after payment of a $10-million regulatory fee to the Michigan Gaming Control Board.

• In addition, Greektown will have to pay a municipal service fee of $4 million prior to the time the hotel construction is complete. This will add an additional burden to the Greektown’s cash flow. The Gaming Control Board has been notified by Greektown that it has had to draw down $15 million of Debtor in Possession financing to pay the Gaming Control Board regulatory fee, a municipal fee and operational costs.

Greektown consultant Conway MacKenzie & Dunleavy has testified that part of the cost overruns related to the hotel construction would have to come from this
money, which is now exhausted.

Further, according to documents, the Gaming Control Board says it is unaware of any substantial steps that Greektown has made to negotiate with creditors, with the exception of retaining an investment banker. “Most of the constituents with whom the board has communicated have indicated that the debtors have had no meaningful discussions with respect to reorganization,” documents said.

Greektown is expected in U.S. Bankruptcy Court today.

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The chief executive of Penthouse says the company is looking to buy a casino on the Las Vegas Strip and generate business by tying it to the adult magazine and website empire.

Penthouse CEO Marc Bell told the Las Vegas Review-Journal for a report published Sunday the best time to buy is in a down economy.

We’re looking to make a presence, take something and clean it up and fix it up and give it a new image,” Bell said. “We think it would be a tremendous draw.”

In addition to thousands of websites and its magazine, the company launched a cable network in January.

Bell says he has talked with “numerous people” to find a property on the Strip. He says he wants “a place where we can have the most impact … only if it would be a significant property.”

“We have no intention to rebrand the name of the hotel,” Bell said. “We would like to see a Penthouse casino presence and a Penthouse pool presence.”

Bell said he envisions girls from the magazine as casino dealers and the possibility of strippers performing inside the hotel, if it becomes legal.

“I would to imagine at point we would be able to, as entertainment gets more risque on the Strip, as Vegas gets more back to its roots,” Bell said.

Penthouse was founded in the United Kingdom in 1965 and moved to the United States four years later.

USAToday

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