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 As more Americans adhere to the old adage that the safest way to double
your money is to fold it over and put it in your pocket, much of the
once-high-flying gaming industry stumbles toward bankruptcy. Many of the
debt-laden companies are having difficulty finding lenders willing to
gamble on a refinancing.Magna Entertainment Corp., the largest horse racetrack operator in North America, entered bankruptcy protection on Thursday with plans to sell its assets. The Aurora, Ontario, company "has far too much debt and interest expense," chairman and CEO Frank Stronach said in a statement.
Trump
Entertainment Resorts Inc. filed for Chapter 11 on Feb. 17 after months
of negotiations with creditors, the third time The Donald's casinos in
Atlantic City, N.J., have passed through bankruptcy protection.
Resorts Atlantic City also could file for bankruptcy. The company reportedly stopped paying interest on its bank loans in November, and lender Column Financial Inc. has been cleared to foreclose on the Atlantic City property, although the casino's owner retains control. Across the country, meanwhile, Las Vegas-based Station Casinos Inc. reportedly said Tuesday that its lender had agreed to forbearance agreements that would give it more time to win approval of a debt restructuring plan. Station Casinos hopes to swap its old debt for less expensive debt securities and land a $244 million capital infusion through a prepackaged bankruptcy filing. The company has rejected a $950 million offer from rival Boyd Gaming Corp. Riviera Holdings Corp., which owns a Las Vegas casino as well as one in Black Hawk, Colo., received a notice of technical default on Tuesday. Moody's Investors Service said on Friday that "without a very significant improvement in operating results, Riviera's capital structure is not sustainable in its current form, and may require some form of restructuring that involves some level of impairment." The ratings agency downgraded Riviera's corporate family rating and others to Caa2 from B3. And even giant MGM Mirage of Las Vegas announced this week that it could breach its debt covenants this year. The company drew the remaining $842 million left on its revolving credit facility in February. Though MGM said in documents filed with the Securities and Exchange Commission that it was currently in talks with the administrative agent on the revolver, the company also said that failure to renegotiate the covenants or obtain a waiver could result in the acceleration of its debt (which would subsequently result in cross defaults under MGM's other financing agreements). MGM warned its auditor would likely add a going concern warning to the gaming company's 10-K annual report. Some of the few winners in the gaming industry seem to be in the Keystone State, where slots casino revenue rose more than 14% in February from the same period last year, despite an additional operating day in 2008 because of the leap year. The gaming industry is still developing in the state. If only the rest of the industry was on a growth path. - Carolyn Okomo Categories Deal Video
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