Juiced politicos not jumping on Kentucky slots bill

March 05, 2002 8:50 AM
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Late last year, the price of a share in Churchill Downs Inc. (CHDN) ranged from $30 to $32 a share. But that changed quickly when the horsemen put aside their differences with the tracks and they jointly pushed for slot machine authorization for the state’s tracks.

By the end of February, Churchill’s stock had risen to the low 40’s based almost solely on the prospects of lawmakers’ approval of slots legislation.

In a recent newsletter, Robin Farley, chief gaming analyst for UBS Warburg, noted that the recently filed bill has developed opposition from some heavy political hitters. People like Speaker of the House Jody Richards, Senate President David Williams and Senate Majority Leader Dan Kelly have expressed their opposition to creating “racinos” in Kentucky.

Add to that the opinion of Attorney General Ben Chandler that a constitutional amendment is required to legalize slots at tracks and would require that the state’s voters approve the constitutional change before such a plan could be implemented.

With all the red flags being hoisted, investors who have been pushing up the price of the stock might find themselves a bit premature. On Monday, with a modest 60,200 shares changing hands, CHDN was down $1.20 to $40.55 a share.

In with the new

Kim Sinatra is the new executive vice president and chief legal officer for Park Place Entertainment Corporation (PPE).

The announcement was made Monday by PPE President and CEO Tom Gallagher.

Sinatra replaces Clive S. Cummis who has retired from his duties as head of the company’s law and corporate affairs. Cummis was a long-time friend and business associate of the late Arthur Goldberg who was responsible for the creation of PPE. Cummis will remain with the company as a member of the board of directors as well as its vice chairman.

Sinatra joined Park Place last June after having served as executive vice president and general counsel of The Griffin Group, a hotel, gaming and entertainment company owned by entertainer Merv Griffin. The Griffin Group was headed by Tom Gallagher before he became the No. 2 man at Hilton Hotels Inc. under Steve Bollenbach.

And then, there’s Florida

Pari-mutuel operators in Florida ”” that includes horse racing, harness racing, dog racing and jai-alai ”” have been trying for years to get state approval for slots at their tracks without success. Usually, opponents suggest that the state’s residents are against the idea since they voted against gaming expansion in 1978, 1986, and 1994.

But, times have changed, say the track operators, considering the expansion of casinos operated by the state’s Native Americans, as well as the establishment of card rooms at the tracks.

It’s still unclear how much support will be generated in Tallahassee but last week a House committee added the slot machine amendment to a pari-mutuel bill just 10 minutes before the deadline for filing new legislation. Later the measure was approved by a 7-5 vote. It now must be taken up by the full House.

Meanwhile, the Senate has a companion bill before it but no action has been taken by any study committee, as yet.

IGT benefits

The proposed expansion of slot machine use at many of the country’s struggling race tracks bodes well for the premier slot machine manufacturer, International Game Technology (IGT).

Not only are Kentucky and Florida eyeing slot machine legislation but the idea is being floated in other states such as Massachusetts, Kansas, Pennsylvania, New Hampshire and Minnesota.

Also, West Virginia has recently approved the addition of machines to the tracks currently using them and Rhode Island is awaiting approval from that state’s Lottery Commission.

Increased utilization of slot machines means greater sales for IGT and also benefits other manufacturers such as Alliance Gaming (ALLY), WMS Industries (WMS), Mikohn Gaming (MIKN) and Shuffle Master, as well as the Australian giant, Aristocrat.

Mandalay reports

Investors saw the glass half-full, rather than half-empty when Mandalay Resort Group (MBG) reported a greater than anticipated loss for the quarter ended on Jan.31.

Critical to the report were comments by Glenn Shaeffer, president and CFO, who said he believed that the negative economic impact caused by the Sept. 11 attacks were behind the company.

“The Las Vegas Strip is shaping up and the climbing market share in Detroit is going to be a contributor in the first quarter,” Shaeffer said. As for the earnings in the first quarter, Shaeffer said analysts had estimated somewhere between $0.29 and $0.52 a share. “If I took the two of those guys and put them in the middle, we’ll be past that number.”

For the most recent quarter, the company reported a loss of $0.10 a share compared with a profit of $0.01 a year ago. Also the company said it had written down the Jean, Nev., properties by the equivalent of $0.55 a share.

Wall Street reacted to the announcement by boosting the share value from $29 to Monday’s closing of $32.35 a share.

California card clubs

One goal set by R.D. Hubbard from the moment his Hollywood Park Inc. (HPK) opened a card club on its property was to get the state to approve ownership of these clubs by publicly-traded companies.

Under existing law, public companies are prohibited from owning card clubs. This forced Hollywood Park to lease its on-track facility to outsiders. Now, there no longer is a Hollywood Park Inc since the racetrack was sold and HPK became Pinnacle Entertainment Inc. (PNK).

But, PNK retained ownership of the card club and a new effort is being made to get lawmakers to change the law.

Biggest opponent to the change is the California Nations Indian Gaming Association who see this as an expansion of gaming and a threat to their operations.

Penn National thrives

Business has been booming at Charles Town Racetrack since it converted to a racino under the auspices of Penn National Gaming Inc. (PENN). And the prospects are that the boom will continue.

Recently, the West Virginia Lottery Commission, which oversees the use by tracks of video lottery terminals, has approved an increase of as many as 1,500 machines at Charles Town. These will be added to the 1,500 machines now being utilized. The track has begun a $60 million expansion project to house the additional machines.

During a public hearing, the track was praised by local residents for being good corporate citizens but the lack of sufficient machines to service the hordes of people looking to play was moaned.

“I couldn’t believe it,” said one lottery official. He said he found two and three people standing in line waiting for their turn to play the machines. “It’s amazing to see this,” he said.

The new expansion facility is expected to be in operation by June.

Meanwhile, PENN continued its northward trek reaching $36.35 in Monday’s trading.

Gaming Summit

The first ever New York Gaming Summit, exploring issues related to the expansion of gaming in the Empire State, will be held April 8-9 at the Desmond Hotel & Conference Center in Albany, N.Y.

The conference is being sponsored by GEM Communications.

Among the subjects to be discussed is the introduction of six new tribal casinos in the state as well as the installation of video lottery machines at as many as eight racetracks.

Among the speakers will be Jan Jones, senior vice president, government affairs and communications for Harrah’s Entertainment Inc. (HET); G. Michael Brown, former CEO of Foxwoods Resort Casino and an attorney with Brown, Previtt & Carrroll; Joe Weinert, gaming writer from The Press of Atlantic City; Andrew Zarnett, gaming analyst with Deutsche Banc Alex Brown, and Bill Nader, senior vice president of the N.Y. Racing Association.

Mexican setback

For the past year, Phoenix Leisure Corp of Las Vegas, has been funding the effort of Viva Gaming & Resorts Inc. (VIVA) to introduce the use of specially-made gaming machines in Mexico.

The effort has been fraught with frustrations because of inconsistencies on the part of Mexican regulators.

Initially, Viva’s “lottery entertainment center” in Mexico City was approved by one regulatory group but was closed down by another group of officials who charged the facility violated Mexico’s anti-gaming laws.

A court decision provided that the facility could reopen but before that happened another Mexican tribunal court ordered that it remained shuttered until the matter could be reviewed by the country’s Supreme Court.

Sartini expanding

Blake Sartini, who left his executive position with Station Casinos Inc. (STN) to acquire and operate Southwest Gaming Services Inc., a 900-machine slot route owned by STN, plans to acquire 23 PT’s Pubs.

The PT’s Pubs are located throughout the Las Vegas Valley. They are owned by Revenue Properties Co. Ltd. of Canada and the local businessmen Phil and Tom Boeckle.

Of the group, 19 of the bars being acquired by Sartini have restricted gaming licenses meaning they have fewer than 15 slot machines. The others have non-restricted licenses although none of the properties have live table games.

Sartini is married to a sister of Station Casinos Chairman Frank Fertitta III and President Lorenzo Fertitta. He formerly was executive vice president of the area’s largest locals casinos operator.

The Insider

The slots operation being conducted by Boyd Gaming Inc. (BYD) at Delta Downs Racetrack in Vinton, La., seems to have settled down after an overwhelming start. There was so much business the counting rooms couldn’t keep up. Initially the property was closed by State Police until order could be restored and again on Wednesday the Boyd operators closed the slot area to insure that their balancing systems were functioning properly.

Barbara Alexander, a senior advisor to the brokerage firm of UBS Warburg, has been named a member of the board of the directors for Harrah’s Entertainment Inc. (HET).

Harrah’s also announced last week that it had signed a deal with Allegiant Air of Fresno, Cal., whereby the airline will provide two weekly charter flights to Reno, Nev.

Rank Group of Britain said it was hard hit during the post Sept. 11 with sizable drops in business at its hotels and at its Hard Rock Café restaurants but made up the deficit with its gaming profits at the Mecca Bingo Halls and the Crosvenor Casinos, all in the U.K.

Bear Stearns analysts have increased their ratings on Hilton Hotels Inc. (HLT) from Neutral to Attractive.

Scientific Games Corporation (SGM) announced it was buying all MDI Entertainment Inc. it does not already own.