Some progress on Gulf Coast but questions remain

Oct 11, 2005 6:17 AM

Despite Mississippi legislation to permit casinos to move inland and the New Orleans mayor’s call for expanded gambling, the future of the Gulf Coast gaming industry was far from clear over the weekend.

Although the Mississippi proposal initially was passed earlier in the week, it wasn’t until Friday that the final language was approved. The hang up focused on the 1990 law that placed casinos on publicly owned tidelands that generated about $7.5 million annually from the casinos as rent. A move onshore might threaten this revenue, some legislators feared.

To resolve the problem, the new legislation will require casinos that move onshore to pay between $400,000 and $750,000 per year in lieu of the rental payments.

Despite the new law, it remained unclear exactly what casino companies would rebuild and where.

Harrah’s Entertainment Inc. (HET) said it planned to build a larger casino to replace the gutted Grand Casino Biloxi but that it was delaying its decision on whether to rebuild a Gulfport casino that was destroyed.

A spokesman said that Biloxi was viewed as a true destination while Gulfport’s gaming experience was not as strong.

And Beau Rivage, the most expensive Gulf Coast casino that was built by Steve Wynn and is now owned by MGM Mirage Inc. (MGM), was thought originally to have suffered only modest damage. However, upon inspection, it was found to have suffered extensively.

In fact, the company has estimated that Beau Rivage had suffered the single biggest loss of any casino on the Gulf coast. Officials estimated that it would cost millions to repair the damage to the 1,740-room resort and that the project could take up to 16 months.

Louisiana’s casino industry, affected by both Hurricane Katrina and Hurricane Rita began its recovery last week with the opening of four facilities. In Lake Charles, the L’Auberge du Lac Hotel & Casino Inc. owned by Pinnacle Entertainment Inc. (PNK) and a pair of riverboats operated by Isle of Capri Casinos Inc.(ISLE) were back in action while the Treasure Chest Casino in Kenner, owned by Boyd Gaming Corp. (BYD) became the first gaming property to reopen, along with Pinnacle’s Boomtown Casino.

However, still closed was Harrah’s New Orleans Casino, the only land-based casino permitted by Louisiana law.

But that could change if legislators agree with New Orleans Mayor Ray Nagin that casino gambling should be expanded to help the city overcome the ravages of the hurricane.

Nagin’s plan would allow Las Vegas-style gambling in the city’s larger hotels located in the central business district.

Mass. Slots

Heavily lobbied by racetrack workers and track operators, the Massachusetts Senate has approved legislation that will permit the state’s four struggling racing facilities to install slot machines, a first for the Commonwealth.

The bill would allow each track — Suffolk Downs, Plainridge Racecourse, Wonderland Park and Raynham Park — to install up to 2,000 slot machines. The vote was 26-9, enough to override a promised veto from Gov. Mitt Romney.

However, before reaching the governor’s desk it must pass the House of Representatives where the leadership has indicated it may not come to a vote because there isn’t "a sense right now that this is on the front burner as far as the members are concerned."

Earnings warning

MTR Gaming Group Inc. (MNTG), owner of Binion’s Gambling Hall & Hotel in downtown Las Vegas, and the Ramada Inn and Speedway Casino in North Las Vegas, announced on Monday that it would fail to meet expected financial results in the third quarter that ended on Sept. 30.

The company said it expects to report revenues of approximately $97.5 to $98 million and net income of approximately $2.8 to $3 million or $0.10 per diluted share. Problems incurred during the third quarter, the company said, were lower than expected traffic and revenues at its Mountaineer Race Track & Gaming Resort in Chest, West Virginia, and at its Binion’s property.

"These expected financial results are preliminary based on the best information currently available," the company said.

THE INSIDER: Among the gaming companies that announced dates for the release of third quarter financial experience were:

MGM MIRAGE Inc. (MGM) to report on Wednesday, Oct. 26, at 8 a.m. PDT.

Penn National Gaming Inc. (PENN) to report on Thursday, Oct. 27 at 6 a.m. PDT.

Las Vegas Sands Corp. (LVS) to report on Wednesday, Nov. 2 at 1:30 p.m. PST.

Ameristar Casinos Inc. (ASCA) to report on Thursday, Nov. 3 at 1 p.m. PST

MTR Gaming Group Inc. (MNTG) to report on Monday Nov. 7.

GTECH Holdings Corporation (GTK) will pay a quarterly cash dividend of $0.085 per share on Oct. 28 to shareholders of record on Oct. 14.

Harrah’s Entertainment Inc. (HET) said it expects to take a $10 million charge in the third quarter for costs related to the Louisiana hurricane damage. The company does not expect to take a loss on its Mississippi operations since it already has received more than $30 million from its insurers.

Moody’s Investors Service has revised its ratings on the debt of Pinnacle Entertainment Inc. from positive to stable.

Global Cash Access Inc. said it has signed a five-year deal to continue providing automated teller and cash advance machines at some Boyd Gaming Corp. properties.

Scientific Games Corporation (SGMS) has received two contracts from the German lottery, one to provide instant lottery tickets and the second for distribution and consulting services.

Lakes Entertainment Inc. (LACO) said oral arguments relative to an appeal of the Indian casino planned for New Buffalo Township, Mich. will be heard on Dec. 8.

Seven of the 27 lawsuits stemming from the 2003 collapse of a casino parking garage being built at the Tropicana Casino and Resort in Atlantic City in 2003 have been settled. The Tropicana is owned by Aztar Corp. (AZR).

Isle of Capri Inc. (ISLE) says its board of directors has authorized the repurchase of an additional 1.5 million shares under its stock buyback program.

Progressive Gaming International Corporation (PGIC), formerly known as Mikohn Corp., announced that it has completed its acquisition of VirtGame Corp.

Gala Group Ltd. became the third largest bookmaker in the United Kingdom last week when it purchased Coral Eurobet for $3.88 billion. The group will have 1,450 betting outlets with more than 2.2 million customers and a 17,000-member work force. It will rank third behind William Hill and Ladbroke’s in the number of betting outlets.

Having failed twice, Victoria Scott, mother of gaming investor Shawn Scott of Las Vegas, is again attempting to place an initiative to legalize video gambling halls in Alaska on the 2006 ballot.