Ruidoso Downs owner faces loss of N.M. gaming license

Nov 12, 2002 5:23 AM

   The gaming future of R.D. Hubbard hangs in the balance as the New Mexico Gaming Control Board decides whether to renew his license to own and operate Ruidoso Downs.

   New Mexico law requires that all gaming licenses be renewed annually. Hubbard is seeking to renew his license to not only operate the track but also the Billy the Kid Casino, the attached slot machine venture.

   Hubbard’s renewal was due on Oct. 23 but the regulators approved a 60-day extension while they investigated his activities in Indiana where earlier this year he was forced to sell his shares in Pinnacle Entertainment Inc. (PNK) and to pay a fine of $726,000. The Indiana regulators issued the orders after investigating an allegation that Pinnacle Entertainment’s Belterra riverboat entertained high rollers at a golf outing with party girls imported from California.

   At the time, Hubbard was chairman and chief operating officer of Pinnacle, a company he formed following a decision to have Hollywood Park Inc. (HPK) exit the horse racing business in favor of concentrating on casino activities.

   Hubbard, a long-time investor in both thoroughbreds and quarter horses, took over Hollywood Park Inc. in the early 90’s following a bitter proxy battle with its previous CEO, Marge Everett. In addition to making physical changes at the Hollywood Park plant, Hubbard also presided over the transformation of the Cary Grant Pavilion into a card club. However, because California law prohibited corporate ownership of card clubs, Hollywood leased the operation to a private operator.

   Toward the end of the decade, Hubbard realized that there would be greater growth in casino gambling than in horse racing and embarked on an acquisition strategy that greatly placed the company’s future on casinos. He then sold Hollywood Park to Churchill Downs Inc. (CHDN) and changed the company name to Pinnacle Entertainment Inc.

   With Hubbard’s departure, the company turned to Dan Lee to guide it out of the troubled waters that caused Pinnacle Entertainment to pay Indiana a $2.26 million fine over the Belterra incident. Lee, a former CFO of the Mirage Resorts Inc. under Steve Wynn, recently firmed up his management team by hiring highly-respected gaming attorney Jack Godfrey, a long-time partner of famed attorney, Frank Schreck. And last week, Lee announced that he was moving the corporate offices of Pinnacle Entertainment from California to Las Vegas.

   Hubbard’s New Mexico problems were exacerbated by his efforts to win a contested battle for a new track to be located in Hobbs. During a hearing last week on a Hobbs petition from Shawn Scott of Las Vegas, a lawyer representing Scott alleged that his petition was rejected because at least one commissioner was holding out for Hubbard.

   The lawyer, Richard Minzner, argued that Hubbard couldn’t be licensed unless the board held a suitability hearing. He asked that all documents collected by the board relative to Hubbard should be released. The request was denied.

   Meanwhile, both the Gaming Control Board’s staff and its attorney, Peggy Hardwick, recommended that Hubbard’s license should be denied. Hardwick cited a state law that bars issuing licenses to anyone barred from gambling operations in other states. She noted that Hubbard’s settlement with the Indiana regulators “effectively barred him from being involved in any gaming activities in that state.”

   Hubbard’s attorney denied that he was barred saying his client “voluntarily” gave up his Indiana license.

   The board is expected to act on the Hubbard license at its meeting on Dec. 3.

End in sight?

   For several years, Delaware racetracks have been riding the gravy train with its slot machines generating huge amounts of cash for the track, the state and the horsemen’s purses.

   But, that may be coming to an end. Following the recent elections, supporters of racetrack slots in both Pennsylvania and Maryland expect favorable legislation in the short term. And that will mean fewer customers for the Delaware tracks.

   Speaking at last week’s “Racino 2002” at Dover Downs Hotel and Conference Center, Don Snyder, president of Boyd Gaming whose profits soared with the installation of slot machines at Delta Downs, said he expected slots at the tracks in both Pennsylvania and Maryland now that favorable state leaders have been elected.

   Principal beneficiaries in those states will be Magna Entertainment Corporation (MIEC), owner of a Pennsylvania harness track and the majority owner of Maryland’s two thoroughbred tracks. Also benefiting will be Penn National Gaming Inc. (PENN), owner of Penn National Race Course, and privately held Greenwood Racing, operators of Philadelphia Park.

   The slot operations in both those states are also expected to put a crimp in the slot operations at Atlantic City and the horse racing activities at the Meadowlands racetrack.

Wynn’s windfall

   Underwriters of the recent initial public offering made by Wynn Resorts (WYNN) have exercised their rights to 3,219,173 shares as an over-allotment option.

   Wynn Resorts granted this option as part of its IPO and has agreed to a closing of the shares on Nov. 13. At that time, Wynn Resorts will receive additional net proceeds of approximately $38.9 million. The IPO priced the individual shares at $13 each.

   The joint book-running managers for the offering were Deutsche Bank Securities, Bear, Stearns & Co. Inc., and Banc of America Securities LLC.

Quebec merry-go-round

   Loto-Quebec, the agency that controls the licensing of casinos and video lottery terminals in the Province of Quebec, Canada, said last week it planned to reduce the number of VLTs being operated in the province. Also, it said it is planning another casino.

   Permits for VLTs will be reduced by as much as 40% during the period between now and next March, officials said. That means that as many as 3,000 machines will be removed from bars and taverns and possibly could be relocated to the province’s four racetracks.

   Casino plans call for a $75 million facility to be built at Mont Tremblant sky resort, north of Montreal.

Agreement near

   Leaders of the Upper Lake Tribe of Pomo Indians have been negotiating a deal with the officials of west Sacramento for a lavish casino and hotel to be located near Interstate 80.

   The tribe said it has agreed to pay the town $72 million over 12 years to help pay for municipal services to the project.

   Planned is a $100 million casino and a 400-room hotel that will also be accompanied by retail stores and an outlet mall.

   It’s expected that the project will create some 2,000 jobs.

The Insider

   Missouri gaming revenues grew by 13% during the month of October, easily leading in percentage gains over other states that reported for the same period. Iowa’s gaming revenues increased by 5.1% while Atlantic City reported an increase of 4.3% for the same period. Declining in October were the revenues for the state of Illinois that reported a 1.7% drop during the period. The reduced revenues were not unexpected since a number of properties have cutback promotional activities since the state increased its gaming taxes.

   After years of disagreement, the officials of the Wyandotte County Unified Government of Kansas has agreed to permit the Wyandotte Tribe of Oklahoma to build a casino and a hotel near the Kansas Speedway. As part of the deal, the Oklahoma tribe will drop its lawsuit claiming historic rights to nearly 2,000 acres of Kansas City, Kan., if a bill in Congress designating 52 acres as part of the tribe’s reservation is passed.

    Boyd Gaming Corporation (BYD) says it plans to repurchase up to two million shares of the company’s common stock. Depending on market conditions, the company said shares may be repurchased from time to time at prevailing market prices through open market or negotiated transactions.

   Meanwhile, Moody’s investors Service has upgraded the credit rating outlook for Boyd’s debt from negative to stable.

   Marc Falcone, chief gaming analyst for Deutsche Bank Securities has downgraded shares of Mandalay Resort Group from buy to hold. He cited concerns over weakening consumer spending and increased room rate pressures.

   The Seneca Nation of Indians has decided to name its casino the Seneca Niagara Casino. The name resulted from a contest the tribe held to find a name of its new casino scheduled to open in January.

   Expressing pride in the fact that some of its employees may be called for military service in the event of a war with Iraq, the Agua Caliente Band of Cahuilla Indians said it will supplement the salaries of its employees while they are on military duty.

   Isle of Capri Casinos Inc. (ISLE) has signed a strategic agreement with Gamecraft Inc. of California to spearhead development of casino games.

   Windsor Woodmont Black Hawk Resort Corp., owner of the Black Hawk Casino by Hyatt in Colorado has filed for Chapter 11 bankruptcy protection.