Casino operators are preparing for a cold winter. Some of the biggest players in the industry expect profits to decline and are trying to play their cards right to have enough chips in their future to ride the downturn out. Take MGM Mirage, which will take in close to $775 million on its Monday agreement to sell its Treasure Island Hotel & Casino on the Las Vegas strip to real estate mogul Phil Ruffin. While MGM isn't exactly running on empty, the move is still an added bonus, giving the casino operator some extra breathing room over a $7 billion loan agreement it already renegotiated the terms of in October.
Continue reading below
The reality is people have less money to gamble and the casinos are feeling the pain. Nevada's casino revenue from gamblers fell 22% to $905 million for October. Other casino operators are more desperate than MGM and are looking to make some kind of divestment.
One such gaming operator -- the Las Vegas Sands Corp. -- is running out of money, and the company admitted last month it had $8.8 billion in long-term debt
at the end of June, saying in a regulatory filing at the time that it
probably won't meet the requirements of loans arranged by
Citigroup Inc., Goldman Sachs Group Inc. and Lehman Brothers
Holdings Inc. and is close to defaulting on its $5.2 billion in debt.
Meanwhile, Trump Entertainment Resorts Inc. has doubled down more times than it can afford, and now it has about $1.25 billion worth of debt outstanding and skipped a $53.1 million interest payment scheduled last month on its 8.5% senior secured notes in order to maintain sufficient liquidity.
Overall, these casinos were too optimistic, having bet their house, so to speak, on the prospects that the good times would continue to roll. Now, it's inevitable they'll likely have to restructure or face bankruptcy. Some would argue bankruptcy may be their only fate in this environment since that would be the only way to clean the slate. But that's just too easy, and shareholders will fight tooth and nail to protect their dwindling investments.
One things for sure: It's likely the gaming sector will see some consolidation and the gaming landscape will look unrecognizable compared to the boom times of just a few years ago. -- Gerald Magpily
See Bloomberg article
See TheStreet.com article
