Voters approve Pinnacle’s $225M La. riverboat

Apr 9, 2002 8:39 AM

Executives and corporate executives of Pinnacle Entertainment Inc. (PNK) breathed a collective sigh of relief Saturday when the voters of Calcasieu Parish approved the company’s plans for a $225 million gambling complex on Lake Charles, La.

The project was proposed by Pinnacle Entertainment after the company was chosen by Louisiana gaming regulators to receive the 15th and final riverboat gaming license. The award was subject to receiving approval from the parish, or county, voters. The final tally showed 57% or 20,413 in favor against 43% or 15,321 opposed.

The area in southwestern Louisiana already is a hotbed of gaming enterprises with riverboats, a “racino” and an Indian casino. To overcome the competition, Pinnacle Entertainment plans to include a hotel and a championship golf course as amenities to its riverboat gambling facility.

Success for Pinnacle Entertainment didn’t carry over to Webster Parish where voters opposed expanded gambling for Louisiana Downs at Bossier City. The track hoped to construct an off-track wagering facility in the town of Minden. The project had the support of some community leaders who felt the Minden entertainment complex including a restaurant, sports bar and big screens telecasting of horse races from across the country would have meant both jobs and tax revenue.

Pinnacle Entertainment, formed by Chairman R.D. Hubbard as a successor to the racetrack dominated Hollywood Park Inc. (HPK), struggled through 2001, especially getting its Indiana riverboat in Belterra moving forward in a competitive area. The company also owns and operates casinos in Nevada, Mississippi and Louisiana. Also, the company has two card clubs in California.

Praise for Aztar

Paul Rubeli, chairman and CEO of Aztar Corporation (AZT) has to be smiling these days as nothing but praise is heard from the residents of Evansville, Ind., where his company operates Casino Aztar riverboat.

Despite major concerns seven years ago, the city leased Riverfront Park to the gaming company for its riverboat development. Even before the gaming facility got underway, Aztar was providing funds to the community as a good will gesture.

Since the boat was launched on Dec. 7, 1995, Aztar has provided millions of dollars in revenues. During the next five years, it is anticipated that the company will provide the city with an estimated $20 million in lease payments.

But, that hasn’t been all. Aztar has been a good corporate neighbor by contributing to such projects as the renovation of Victory Theatre; the conversion of the Vanderburgh into the Evansville Centre; the construction of Pigeon Creek Greenway, and the United Fund.

“I don’t know what we would do if we didn’t have the casino here,” said one official. “We definitely would not see the growth we have.”

License studied

Las Vegas investor Shawn Scott and the board of Mid-State Raceway (also known as Vernon Downs) still don’t know whether the track will be licensed for its harness racing meeting beginning on May 3.

Members of the N.Y. State Racing and Wagering Board were still studying over the weekend the request by the track to begin its 2002 season next month. Under scrutiny, officials said, was the $8.5 million two-year loan that has been made by Scott, a successful buyer/seller of casinos and racetracks.

State officials have said they wanted to be sure that if the racing dates are granted the track will be financially-stable to meet its obligations. Reportedly, a copy of the Scott lawn agreement was not filed in time for the state regulators to act on the date request last week.

“The board is still reviewing the issue,” said a board spokesperson who noted that no date was set for a meeting at which action could be taken.

Sunland bonanza

Stan Fulton’s Sunland Park Racetrack and Casino in New Mexico has been booming since a Texas judge closed down an Indian casino in nearby El Paso, Texas.

“Since the Tiguas closed down,” remarked a Sunland customer, “sometimes it gets hard to grab a machine on the weekends.”

The track has been operating its full complement of 600 machines since the law became effective last year. Now, it is negotiating with Ruidoso Downs to add 150 more slots to its casino floor. The New Mexico law permits racetrack operators to lease machines from other tracks that can’t use their full allotment. Ruidoso Downs has a seasonal business and doesn’t need all the machines provided by law.

Fulton is the founder and former chairman of Anchor Gaming. When he sold his interests in the slot machine manufacturer, he retained the right to acquire Sunland Park which was an under-performing asset in the Anchor Gaming portfolio.

Andersen barred

Arthur Andersen’s woes continued to mount over the weekend when state officials in Louisiana banned state and local agencies from using the auditor firm’s services because of the Enron scandal and subsequent indictment.

Following receipt of the state directive, Hillary Crain, chairman of the Louisiana Gaming Control Board advised all gaming companies doing business in the state that the Andersen would no longer be acceptable.

This followed the steps taken a few days earlier by the N.J. Casino Control Commission that banned casinos in that state from doing business with the Andersen firm.

And, on Friday, the Mohegan Tribal Council ruled that it would terminate its relationship and that of the Mohegan tribal Gaming Authority with Andersen. A Council spokesman said the board felt it had no other choice.

Actions by other gaming states were being reviewed by regulators in Nevada where Andersen is a prominent player in dealing with the major casino companies.

Hawaii investors

Detroit investors made pikers out of Sun International Hotels (SIH) in their efforts to get legislative approval for the establishment of two casinos on the Hawaiian Island of Oahu.

According to records maintained by the state Ethics Commission, Marketing Resource Group of Lansing, Mich., an organization that was funded by investors in the MotorCity Casino in Detroit, poured $108,679 in their failed effort to get lawmakers to support the legalization of gambling during the current session.

Among the investors listed as part of Marketing Resource Group was Marian Illitch, whose family owns the Detroit Tigers baseball team and the Little Ceasars pizza chain.

The commission said that the Coalition for economic Diversity, the group backed by Sun International Hotels spent $9,832 in its lobby efforts.

Magna recovery

Shares of Magna Entertainment Corp.(MIEC) rallied Monday in trading that followed the company’s announcement that it would sell 20 million shares of its Class A Subordinate Voting Stock.

Lead underwriter, Bear Stearns, priced the offering at $6.65, substantially below the company’s recent high price of $9.10 achieved on March 25.

With 1,875,000 changing hands Monday, the stock price closed at $7.80, an increase of $0.38 for the day.

The company said in its offering that it would make available as an over-allotment option up to three million shares to its underwriters.

Patents expanded

Looking to strengthen its intellectual property portfolio, Acres Gaming Incorporated (AGAM) announced it had received another patent covering its proprietary bonusing and player loyalty technology.

The new patent brings to five the number of patents the U.S. government has issued since July 1, 2001.

The most recent patent involved the dynamic threshold for pool-based bonus promotions in electronic gaming systems. The others covered the following areas: method and apparatus for promoting play on a network gaming device; method and apparatus for controlling cost of playing electronic gaming device; two patents for computer network for controlling and monitoring gaming devices, and networked credit adjust meter for electronic gaming.

During the past week, the company was the subject of an article in Business Week in which writer Gene Marcial notes that Acres Gaming holds 10% of the bonus market and has an order backlog of $20 million and cash on hand of $12.6 million or $1.15 a share.

Horse purses eyed

While arguments go on relative to how the state of Illinois should handle the riverboat license that appeared headed to the suburb of Chicago called Rosemont, some legislators are arguing over the amount of money that would be applied toward race purses at nearby Arlington International racetrack.

Actually, the law that was passed in 1999, with the political assistance of Richard Duchossois, then owner of Arlington International, provided that 15% of the state’s tax revenue from the riverboat casino. Current projections have the casino taking in $450 million, thus generating about $65.5 million for purses.

That number has one lawmaker livid. He has proposed that purse reimbursement be limited to $25 million.

Lobbyists for the track call the effort “pledge reneging” on the part of lawmakers. No one was prepared to predict how the law amendment would fare once it is brought to the entire House.

Analyst warning

Shares in International Game Technology (IGT) and other gaming machine manufacturers fell last week following a warning from a Merrill Lynch analyst.

David Anders cautioned that rejections of slot machine efforts in both Kansas and Kentucky where early indications favored such legislation boded poorly for gaming device manufacturers. Also, he said, similar efforts had failed in other states as well.

IGT’s share price fell on the warning and has been struggling ever since. On Monday, IGT shares closed at $59.35, an increase of $0.12 for the day with only 633,000 shares changing hands.

The Insider

MGM MIRAGE Inc. (MGG) will hold a first quarter conference call via the Internet on Wednesday, April 17, at 8 a.m. (PDT).

After reporting strong results for the fourth quarter of fiscal 2002 (earnings per share of $0.93 versus last year’s $0.79), GTECH Holdings Corporation (GTK) saw its share price surge $2.50 on Monday to a closing price of $56.

Macao’s casino licenses were highly sought after in a recent bidding round even though the Chinese holding will tax gaming revenues at 35%.

Ainsworth Gaming Technology Ltd of Australia has received approval to supply its gaming devices to the Sydney Star Casino.

Coinless Systems Inc. (CLSY) has signed a licensing agreement with Atronic Americas LLC.

The Connecticut Supreme Court has upheld the sovereign nation status of recognized American Indians and has ruled that casino patrons must bring their grievances to the tribal courts.

Silver Legacy Capital Corp. has issued $160 million in notes at 10.125%.

The Ontario Lottery and Gaming Corp. has put the Fort Erie, Ont., slots operation on round-the-clock status for weekends only beginning last weekend. Operational hours for Mondays through Thursdays will be 9 a.m. to 3 a.m.