Financial news out of New York may indicate the credit freeze that has stymied casino operators could be thawing out, allowing cash to flow more easily into the gambling industry.
Shares of Empire Resorts are on the rise thanks to word it has reinstated a critical credit facility. In all, the stock is up over 25% over the last two sessions.
Empire had been in default of critical loan covenants to Park Avenue Bank of New York, which holds nearly 95 percent of the casino operator’s senior debt.
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Fortunately, a family-owned Malaysian investment company came through with more than enough cash to get Empire out of the crunch. The firm, Kien Huat Realty III, promised to invest $55 million plus a $10 million line of credit.
The investment will allow Empire to rid itself of the Park Avenue Bank debt before its maturity at the end of this year.
There are several reasons why this is good news for gaming.
First, it shows that investors and banks are willing to loan once again. By lowering its interest rate from 15% to 8%, Park Avenue Bank showed its willingness to compete for loan action once again.
Of course, the action comes when Empire has a surefire financial backer, but the move illustrates the bank’s willingness to at least put its money in circulation. It is fantastic news for an economy looking to grow.
Also, Empire’s strong share price appreciation is a good indication of the Street’s bullish outlook for the gambling sector.
"As the nation’s economy rebounds, downtrodden casinos and track operators will see a renewed influx of customers," said Andrew Snyder of Today’s Financial News. "With unemployment ready to hit 10%, it won’t happen overnight. But remember the market is always looking forward."
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