Kentucky appears headed toward expanded gaming in 2002

Dec 11, 2001 5:49 AM

A half-dozen years ago, Tom Meeker, president and CEO of Churchill Downs Inc. (CHDN), was asked how he would react if casino gambling came to Kentucky. He replied: “I would don a (riverboat) captain’s hat.”

At the time, horsemen in the heart of “bluegrass” country, strongly opposed any thoughts of permitting Kentucky to expand its gambling agenda. But, that was before Caesars, now Park Place Entertainment Corp. (PPE), berthed a riverboat in Indiana, across the river from Louisville, Ky., and other riverboats were stationed on the Ohio River, near Cincinnati.

Negative impacts on the racing activities of Kentucky’s horse tracks, caused many of the horse people to change their ways of thinking. All of a sudden, expanding gambling to include slots at the tracks, became acceptable.

Just two years ago, when newly-elected Gov. Paul Patton floated the idea of expanded gambling, there were no takers. But, definitely times have changed. Success of ”racinos,” those tracks in Delaware, West Virginia, Iowa, woke up traditionalists. They began to agree with Gov. Patton that they were tired of “losing a lot of revenue to Indiana, Illinois and West Virginia.”

Kentucky lawmakers are expected to take up the issue of expanding gambling into slots at the tracks or riverboats in January. And, the current thinking is that it will pass.

GTECH excels

GTECH Holdings Inc. (GTK), whose shares plummeted a year and one-half ago because of questionable business practices attached to prior management, reported a spectacular third quarter of fiscal year 2002, ended on Nov. 24.

The company said revenues for the period totaled $263.6 million, an increase of 19.2% over the same period last year with net income reaching $21.6 million or $0.73 per diluted share.

And driven by product shipments, management said, the fourth quarter should reflect growth of between 9% and 10%.

The company’s improved fortunes began when former Wall Street analyst Bruce Turner, then a member of the company’s board of directors, took over as temporary chairman following the resignation of the company’s top two officers. Turner continued to guide the company out of its business morass until selection of Howard S. Cohen as CEO and president.

Following the announcement of the quarterly earnings, the board of directors authorized a new share repurchase program for up to an aggregate amount of $75 million of the company’s stock.

Slow ramp up

MTR Gaming (MNTG), which operates a casino in North Las Vegas but which has most of its gambling operations in West Virginia, saw its stock rating downgraded last week by Bill Schmitt, chief gaming analyst at CIBC World Markets.

Schmitt said he had two concerns that caused him to reduce his rating on the stock from a “strong buy” to “buy.”

First, he said he felt the ramp-up of revenues from a slot expansion and higher betting limits permitted by regulators at the company’s Mountaineer Park, was slower than he had expected. Also, he cited potential increases in competition from nearby states that may be jumping into the gaming picture.

“As such,” he said in a recent report, “we are reducing our rating to buy with a $14 price target, down from $15.”

An insider deal

Phoenix Leisure Corporation (PLS) has acquired a 50% equity interest in four mini-casinos being operated in Washington State by Cleopatra Gaming Management. Phoenix has agreed to pay Cleopatra $1.8 million for the position.

Cleopatra is owned and managed by Eric Nelson, Las Vegas auctioneer and real estate developer who also is chairman and president of Phoenix Leisure Corporation.

The properties being operated by Cleopatra are the Cable Bridge Casino and Club Casino in Kennewick; Wild Goose Casino in Ellensburg and Wild Grizzly Casino in Kelso.

Phoenix attempted to become a partner with Viva Gaming in a gaming operation in Mexico City but the property was shut down by authorities.

In addition to these activities, Phoenix owns Wyoming Downs horse track near Evanston, Wyoming, and four off-track wagering facilities.

Admiral eyed

According to an exclusive report in the St. Louis, Mo., Business Journal, the partners in the Casino Queen Inc. riverboat have set their sights on the President Casinos on the Admiral.

The report announced last week said the Casino Queen’s owners ”” Charles W. “C3” Bidwill III, whose family is involved in the operation of the Sportsman’s Park racetrack in Cicero, Ill.; Michael Gaughan, owner and operator of several Las Vegas casinos, and local investors Patrick Kenny, Timothy Rand and William Koman, Sr. ”” have been talking about buying the Admiral for several weeks.

An official of President Casinos Inc. (PREZ) said he would sell the Admiral for $175 million, but “not a penny less.”

The Insider

Harrah’s Entertainment Inc. (HET) announced Monday that it was dropping the $3 per room energy surcharge imposed earlier this year. Reason given was the substantial drop in energy prices.

In New Orleans, the Harrah’s Casino reportedly has chosen a site near their land-based downtown gambling hall to locate its new hotel.

Chalk one up for Ralph Engelstad’s Imperial Palace in Mississippi. A suit brought by a disgruntled employee claiming wrongful termination was dismissed by a circuit court judge.

MGM MIRAGE Inc. (MGG) and Asian gambling giant Stanley Ho are among 21 applicants for three casino licenses to be issued by the government of Macau.

Standard & Poor’s has raised the credit rating of Trump Hotels and Casino Resorts following the payment by the company of $91 million to bondholders.

An arsonist is being sought as the person responsible for a fire at the MGM MIRAGE’s Hotel & Casino in Darwin, Australia. About 150 guests were evacuated without serious injuries, although about 10 people were treated for smoke inhalation.