Court clears way for Stations casino on Indian land

Sep 10, 2002 7:29 AM

   Barring a change within the next couple of days, Station Casinos Inc., (STN) will be able to go forward with the building and managing of a $215 million casino for a California Indian Tribe.

   The U.S. District court ruled Monday against the opponents to a casino being developed on tribal lands by the Auburn Indian Community on reservation land near Sacramento. However, the court did delay entering a final order of its decision for 48 hours to provide the opposition with time to seek a ruling pending an appeal.

   The lawsuit involved a 49-acre parcel located in Placer County, Cal., in the Sacramento metropolitan area. Plans call for the construction of the Thunder Valley Station Casino that will house between 1,250 to 2,000 slot machines and about 100 table games. There also will be the usual amenities for dining and entertainment and parking for 3,000 vehicles.

   Should the project go forward, Station Casinos executives believe the casino will open in the second half of 2003.

Changing times

   With all the hoopla on Wall Street about the role of analysts and their involvements with the companies that they follow, a number of investment brokerages have changed the way their analysts rate companies.

   Jason Ader, one of the most respected gaming analysts who performs his duties for Bear, Stearns, noted in a research paper that Bear, Stearns Rating Distribution involves the following:  62.7% Outperform (25% are investment banking clients); 33.8% Peer Perform (12.1% are investment banking clients), and 2.9% underperform (2% are investment banking clients).

   The announcement was on an equity research paper on Isle of Capri Casinos Inc. (ISLE) that was downgraded to “underperform.” Ader said that the new fiscal 2003 earnings per share estimate is $1.65, down from $1.77 per share due to more modest expectations from Vicksburg, Miss., and Lake Charles, La., because of increased competition, and a less substantial reduction in debt given the $135 million capital expenditure spending project.

   “We believe further upside in Isle’s shares is limited and we expect Isle to underperform its gaming peers from current levels,” Ader said.

   In trading Monday, ISLE fell $1.71 a share to $19.97 on heavy trading involving more than one million shares.

King slips

   The Grand Victoria Casino in Elgin, Ill., the riverboat operated by half-owner Mandalay Resort Group (MBG), failed to live up to its track record during the month of July. Admissions during the period fell off badly, according to gaming regulators.

   Cause of the decline was the opening of the Hollywood Casino in Aurora.

   Since its opening, the Grand Victoria has been the “king” of Illinois casinos easily outdistancing the state’s other eight riverboats. But in July, the boat’s admissions fell nearly 18%, although gaming revenues were down only 4% from a year ago, the Illinois Gaming Board reported.

   However, the decline, similar to the one in June, has city officials worried since the community relies on the riverboat to meet its budgetary needs. So far, officials said, the city’s budget has not been impacted because a conservative view was taken when it was feared that a riverboat would be operating out of the Chicago suburb of Rosemont.

   Still, the city did budget $24 million in tax revenue, equal to last year’s figure. Continued decline in business could adversely affect those estimates.

Nevada approval

   It was a difficult half-year for WMS Industries Inc. (WMS) the Illinois-based slot machine manufacturer but the light at the end of the tunnel has now become a blazing spotlight.

   Last week, the Nevada Gaming Control Board approved both the WMS 2.57 version of its operating software system and its new machine, Bottom Line.

   Several months ago, the company came under regulatory fire when glitches were found in the operating system of some of their machines. Although no player in any jurisdiction was short-changed in any way, regulators ordered that the glitches be fixed within a specified time frame.

   The company announced that in June it had upgraded all of its gaming devices in Mississippi and that with the recent approval of its 2.57 version all of its machines in Nevada would also be upgraded.

   Commenting on the Nevada Gaming Control Board action, WMS president and CEO Brian Gamache said, “Approval of version 2.57 of our operating system software and Bottom Line represents the accomplishment of two more important milestones in WMS’ technology improvement plan.”

Bankruptcy ordered

   A federal court has ordered the controversial Emerald Casino to file for bankruptcy thus stalling a settlement between the casino company and the State of Illinois that would have left the town of Rosemont with no chance of getting the state’s final riverboat license.

   The judge who made the ruling ordered the bankruptcy be implemented this week.

   Such a move would upset the plan developed between the operators of Emerald Casino and state officials requiring the Emerald investors to get their initial investment back after giving up claims to their license. This would have permitted the state to open the bidding for the license to all communities that developed a link with an established gaming company.

   Rosemont wants to be reimbursed for the $45 million the community invested in a parking garage that would have serviced the Emerald Casino.

More turmoil

   Further turmoil seemed in the offing with the ouster of Illinois Gaming Control Board chairman Gregory Jones. He was replaced by Elzie Higginbottom, who has been characterized as having close ties to Chicago Mayor Richard Daley.

   In making the decision, Gov. George Ryan denied the selection had anything to do with the Emerald controversy.

   Jones wanted to remain on the board but he would have been the only holdover on a board that has been completely revamped since the Emerald Group controversy developed.

   Higginbottom’s elevation to board chairman left a vacancy that Ryan filled by naming a former state prosecutor, Atty. Gary Peterlin of LaSalle County, to the position.

   Dropping Jones from the board really riled gaming critic Rev. Tom Grey, executive director of the National Coalition Against Gambling Expansion. Grey said he believed Jones when he said he was going to be open and fair in awarding the state’s 10th gaming license.

   “No one can have any confidence in what happens from this point forward,” Grey said.

U.K. suit

   Anti-gaming litigation has spread to England where the government faces a multi-million pound class action suit has been filed by alleged gambling addicts who blame the authorities for their problems.

   But the problem, the suit filers claim, resulted from the fact that the gaming regulators had failed to fix a legal age limit to prevent youngsters from placing bets through the government operated betting systems at both horse and dog tracks.

   Complainants say they have evidence that some of the addictive gamblers began making their bets when they were as young as eight-year-olds. They claim that wagering regulators failed to protect children by failing to place age limits and thus started some people on the road to ruin at a very early age.

Carroll at the ready

   Kentuckian Jerry Carroll made his reputation in racing, both auto and horses, and now he wants the opportunity to become a casino operator. But, observers believe that getting legislative approval will be the biggest problem he has ever faced.

   During the 1990s, Carroll was the prominent owner of Turfway Park, a racetrack that he completely refurbished and promoted into a major force within the thoroughbred racing industry. He sold the track three years ago and built the $152 million Kentucky Speedway.

   During the last session of the Kentucky legislature, he saw support grow for the idea of putting video lottery terminals at the state’s racetracks and realized that by taking the movement a step further he could become a major player. He since has lobbying elected officials to consider expanding their gaming view.

   Racetrack operators were encouraged by the response to their slot machine petition and felt that they would gain strength as time goes on. However, a legal question could delay any legislative action. Some insist that a constitutional change through a statewide vote will be required.

   That’s exactly what Carroll has been advocating.

   “We need money in this state but nobody wants to be taxed. So let the people decide. How can you go wrong if you let the people decide?” he said.

The Insider

   Shelby Clark has joined Ameristar Casino St. Charles, owned by Ameristar Casinos Inc. (ASCA), as director of human resources. Before joining Ameristar, Clark was corporate vice president of human resources for Gordon Biersch brewery Restaurant Group.

   For years, an obscure former quarter horse track near Binghamton, N.Y., has served as the home for rodeos and concerts but it now has been leased by TrackPower, a group that hopes to get approval to install video lottery terminals. TrackPower plans to hold harness racing at the facility, provided it can get slot machine approval.

   Argosy Gaming Corp. (AGY) has advised the Illinois Gaming Board it has reduced the size of its refurbishing of Empress Casino in Joliet from the initial $80 million to $40 million due to the recent increase in gaming taxes. The company will bring two barges to the Joliet site to replace the casino’s two riverboats.

   August riverboat gaming revenues in Iowa grew by 2.7% while so-called racino revenues grew by just 0.3%. Particularly hard hit were the riverboats and racinos operated by Harrrah’s Entertainment Inc. (HET). In aggregate, the revenues declined by 4.4%.

   MTR Gaming Group Inc. (MNTG) reported that total gaming revenues at Mountaineer Race Track & Gaming Resort in Chester, W. Va., during the month of August hit a record $22.7 mill