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Penn National raises curtain on Charles Town expansion

Jul 2, 2002 8:04 AM

Penn National Gaming Inc. (PENN) continues to mine gold at the company’s Charles Town Races and Slots facility in Charles Town, West Virginia.

On Monday, the company opened the first phase of its expanded gaming area with 587 new reel spinning, coin-out slot machines and a 1,500 space parking garage. With the additional machines, the property now sports 2,587 gaming devices.

Charles Town has been granted state approval to raise its slot machine allotment to 3,500 devices. The company said it plans to install the remaining machines at various intervals during 2003.

"When we acquired Charles Town in 1997," explained Peter Carlino, CEO of Penn National, "it was our goal to re-establish the operations as an outstanding thoroughbred racetrack facility, a quality entertainment center and an economic contributor to the region. Through our partnership with local officials, the West Virginia Lottery Commission, and the participating horsemen, we are achieving this goal."

Carlino added that he was confident "our aggressive, yet prudent long-term, master-planned approach to Charles Town’s expansion will enable patrons to have even better access to the facilities and an overall improved entertainment experience."

Last month, Penn National Gaming offered a 2-1 stock split. During trading on Monday, PENN closed at $16.53 per share a drop of $1.62 a share during a day when both the Dow and Nasdaq experienced serious declines.

Filling in

Now that the major credit and debit card companies and a number of major banks have stopped permitting their customers from making online Internet bets, another publicly traded company is attempting to become "the currency of choice."

PayPal Inc. (PYPL) reportedly has signed up 500 Internet gambling sites bringing the company’s roster of clients to 1,022. But their efforts have not gone unnoticed. State and federal regulators, including the attorney general’s office in New York, have started looking into the company’s activities.

"If you help to facilitate or promote gambling," said a New York official, "you could be found guilty of breaking the law."

And the view of certain regulators who believe Internet gambling violates current law, has not evaded PayPal’s officials, either. In a recent filing for a secondary stock offering with the Securities and Exchange Commission, the company noted that it was well aware that service gambling accounts could be termed "high risk" accounts.

Tax hike signed

It took him several days to get around to it but on Friday Illinois Gov. George Ryan finally signed into law the new tax code affecting the state’s nine licensed riverboats.

Under the new law, which is expected to raise about $140 million annually, riverboats will be taxed on a sliding scale that reaches 50%. Also increased was the admissions tax that got a $1 bump. The entire $1 will go directly to the state.

After reviewing the law and the recent revenues generated by the riverboats, the Wall Street firm of Bear Stearns came up with the following estimates: Argosy Gaming Co. (AGY) with two casinos will see its annual earnings decline by about 45 cents a share; Hollywood Casino Corp. (HWD) with one property, also will see a drop of 45 cents in earnings per share; Mandalay Resort Group (MBG), part-owner of one of the most lucrative licenses being operated, 21 cents per share; Harrah’s Entertainment Inc. (HET), 20 cents a share, and Boyd Gaming Corp. (BYD) five to six cents per share.

Name changed

What used to be called the Casino Magic Casino in Bossier City, La., will now bear the name Boomtown. The property is owned by Pinnacle Entertainment Inc. (PNK) which bought the facility last year. It recently underwent a $25 million overhaul.

"We needed to be competitive in this market," said Boomtown GM Dale Darrough, who developed his casino management skills by wearing the pinstripes of several Las Vegas casinos.

"Our property was six years old and it was getting dated and tired. We needed to infuse some money into it. We believe we now have the amenities not only to scare our competitors, but to grow the market itself," Darrough said.

The Schreveport-Bossier City area has four riverboat casinos in operation.

California growth

Even the liberal Los Angeles Times is scratching its editorial head trying to understand how California has grown into "one of the largest gaming states in America."

When all this talk of permitting Indian gaming developed in the late 1990s, the newspaper noted, the state’s citizens were given the impression that the casinos would be small and would be located in rural areas.

But, that hasn’t been the case. Witness: the opening last week of the $262 million Pechanga Resort & Casinos in Temicula. Reportedly a crowd of 40,000 jammed the facility during the opening and that it resulted in a 10-mile backup on I-15, the route that takes Las Vegans directly to San Diego.

The Times pointed its editorial finger at Gov. Grey Davis, saying that he had assured the voters who approved Prop.1A that the state would cap the number of slot machines at 45,206. Recently, however, the state’s gaming regulators raised the number of slots to 51,300 with many more to come.

Blame for the construction of spectacular casinos was placed on Nevada with both its money and its expertise. However, Nevada was recognized for having strict regulation, a need that is "compelling in California."

Internet future"

California politicians were agog last week when the full weight of the Native American lobbying influence was felt as lawmakers considered legislation that would have banned Internet gambling.

Before any action could be taken, the Indian lobbyists insisted that if such a bill were passed there would have to be an exemption for them. Obviously, said one observer, the fact that the Indians wanted an exemption could be interpreted to mean that they are interested in Internet gambling and don’t want anything to intervene when they develop their own plans.

Once the lobbyists interests became known, support for the bill died. There wasn’t even a motion made to bring it up for discussion.

No shrinking violet

One thing about South African casino developer Sol Kerzner: no one ever thought that he was a shrinking violet. So it was not too surprising that in restructuring his company, Sun International Hotels Limited (SIH) he elected to change the name to Kerzner Intenational Limited.

The change became effective on July 1.

As for trading, the previous symbol of SIH was replaced by KZL. The stock is traded on the N.Y. Stock Exchange.

Kerzner is responsible for the development of several gaming properties including Atlantis Resort on Paradise Island. His biggest claim to fame, however, was the financing, construction and operation of Mohegan Sun casino, just eight miles from Foxwoods Resort in Connecticut.

Although Kerzner partnership, Trader Cove Associates, gave up the hands-on operation of Mohegan Sun, he and his associates will receive a percentage of the gross revenues for the next several years.

The Insider

Casino action in Deadwood, S.D., was curtailed over the weekend when a roaring wildfire burned out of control on a ridge above the city. By order of Gov. Bill Janklow, the casinos were permitted to grab the cash as they were leaving their properties.

Underwriters of a public offering being made by Scientific Games Corporation (SGMS) had announced that they would exercise their full option to purchase 1,875,000 shares of stock. The company sold 12.5 million shares at $7.25.

A $1.2 million fine has been suggested by the staff of the Indiana Horse Racing Commission against Indianapolis Downs racetrack still under construction. The track allegedly failed to disclose that it had hired a paid consultant and lobbyist who had questionable contact with state officials. The allegations are being denied.

Century Casinos Inc. will have an open conference call on Friday at 9 a.m. PDT during the company’s annual meeting of shareholders.

Resorts International Hotel and Casinos Inc. has extended its offer to exchange its first mortgage notes until 5 p.m. on July 9.

Zacks.com has added Mandalay Resort Group Inc. (MBG) to its coveted No. 1 Ranked list.

Casino Journal Publishing Group has bowed to the competition and sold its Poker Digest magazine to Shulman Media LLC, owners of the successful Card Player magazine.