Katrina shuts Gulf casinos; Harrah’s pays workers

Aug 30, 2005 3:44 AM

Casino workers on the Gulf Coast were given an unexpected vacation on Saturday in anticipation of the devastation expected from Hurricane Katrina.

For some, the employees of Harrah’s Entertainment Inc. (HET), it was a paid vacation. In a statement to CNBC on Monday morning, Gary Loveman, Harrah’s chairman and CEO, said the Harrah’s employees would be paid for the time they were prevented from working because of the hurricane.

At the time of Loveman’s announcement, it still was not known just how much damage the Louisiana and Mississippi riverboats, and the land-based Harrah’s New Orleans casino had incurred. Harrah’s had the largest exposure with nine gaming properties in the hurricane’s path.

Analysts estimated that Harrah’s loss because of the casino closures could range between $1.8 million and $2.5 million.

Other casino companies impacted by the storm were expected to lose less. Boyd Gaming Corp. (BYD) was targeted for a loss of as much as $450 million; Isle of Capri Casinos Inc. (ISLE), $350 million, and Pinnacle Entertainment that recently opened a beautiful casino in Lake Charles, La., up to $400 million.

Initially, when the market opened on Monday morning, shares of gaming companies were hard hit with losses. However, as the day went on the prices of these companies improved.

At the close of trading Monday, share prices were as follows: HET, $$72.86 up $0.36; BYD, $47.47 down $0.32; ISLE, $23.42, down $0.76, and Pinnacle, $22.07 down $0.76.

NYRA threatened

It was good news for Churchill Downs Inc. (CHDN) and Magna Entertainment Corporation (MECA) on Friday when two major powers in New York State suggested that there will be a new operator of the state’s major racetracks in 2007.

Both Gov. George Pataki and Senate Majority Leader Joseph Bruno indicated the next franchise holder for Belmont, Aqueduct and Saratoga will be a lot different from NYRA.

During NYRA’s troubled times these past two years, Churchill Downs and Magna, the two largest racetrack operators in North America, have made bids to take over the tracks’ operations.

The politicians indicated that NYRA has not proven itself ”˜worthy of the franchise" having lost nearly $40 million in the past two years.

"This is a multibillion-dollar business and it has to be run professionally and efficiently," Pataki was quoted as saying.

Merger delayed

Without an explanation, the Illinois Gaming Board announced that it was postponing its scheduled vote on the proposed $1.8 billion acquisition of Argosy Gaming Co. (AGY) by Penn National Gaming Inc. (PENN).

In announcing the postponement, Penn officials said they believed the board delayed its vote because it wanted additional time to review the information Penn National provided regarding the takeover of Argosy’s Alton Belle riverboat casino in Alton, Ill.

Under review by the Illinois regulators is the question of whether the acquisition would create an excessive economic concentration of assets in Illinois.

He’s baaack

For more than a decade, Barry Sternlicht guided the company he founded, Starwood Hotels & Resorts Worldwide Inc. (HOT), into one of the country’s most successful hostelries. Then a few months ago he announced that he was giving up his job to focus on other matters.

But, his self-exile from the hotel business didn’t last long. Last week, he announced that he was forming a joint venture with an affiliate of Lehman Brothers Holdings Inc. to acquire Le Meridien’s real estate portfolio of owned and leased hotels.

But the upscale Le Meridien’s brand is being acquired by Sternlicht’s former firm, Starwood Hotels & Resorts World Inc. The company also features Sheraton, Westin and "W" among its other brands.

The Le Meridien deal is expected to close by the end of the third quarter.

New partners

There’s a new player in the New York racing market. It’s Nevada Gold & Casinos Inc. (UWN). The company said it is forming a new limited liability company with UWN owning 50% and the other 50% held by Tioga Downs Racetrack.

The newly formed entity will pursue harness racing and a slots operation at the defunct Tioga Downs racetrack that is located just west of Binghamton. Also, the entity will make a bid for the bankrupt Vernon Downs, another harness track and a potential racino.

Beginning immediately, said Nevada Gold, is construction of a $35 million plan for Tioga Downs where plans call for the installation of 750 video lottery terminals.

Nevada Gold and Casinos Inc. has gaming operations in Colorado, California and New Mexico.

THE INSIDER: Scientific Games Corporation (SGMS) says it has received a two-year extension of its contract with the Hoosier Lottery of Indiana.

Moody’s Investors Service has raised the debt of Station Casinos Inc. (STN) to Ba1 from Ba2 with a stable outlook.

Station Casinos Inc. will hold a conference call to announce its third quarter results on Tuesday, Oct. 18, at 9 a.m. PDT.