Black Gaming may look to briefly close Mesquite casino - Business

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Nov. 14, 2008
Copyright © Las Vegas Review-Journal

Black Gaming may look to briefly close Mesquite casino

By ARNOLD M. KNIGHTLY
REVIEW-JOURNAL

Mesquite may lose a casino, at least for a while.

Black Gaming may temporarily close one of its three Mesquite properties to cut costs, according to a Nov. 3 update to a bank agreement after the gaming company defaulted on a loan.

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Company Chairman and Chief Executive Officer Randy Black Sr. this week would not say which of the casinos -- CasaBlanca, Virgin River or Oasis -- could be closed or when it might happen.

"Revenue declines have accelerated," Black said during Wednesday's earnings call. "Although we have reduced expenses in every effort to keep pace, we're faced with the prospect of having to take increasingly more drastic steps to reduce our fixed expenses. Compounding these issues, our balance sheet is ill-prepared to support further operational decline."

The bank agreement, outlined last week in a filing with the Securities and Exchange Commission, runs through Jan. 15. Based on this, any casino closure would last only until then unless the deal with the bank was updated.

The closing of a property, however, is far from a sure thing.

The company, which operates 80 miles northeast of Las Vegas, is also considering restructuring, refinancing or recapitalizing the company.

Black led an employee meeting Wednesday to discuss the company's status.

Black Gaming posted a net loss of $10.1 million in its third quarter ended Sept. 30, up from a $7.9 million net loss a year earlier.

The latest loss came even as expenses decreased 16.1 percent, or $6.4 million, in the quarter.

Third-quarter revenues dropped 23.6 percent to $28.2 million from $37 million.

The default centers on a $15 million credit facility through Wells Fargo, due June 30, 2011, that fell out of compliance when 12-month cash flow fell below covenant terms.

Third-quarter cash flow, defined as earnings before interest, taxes, depreciation and amortization, was at a negative $900,000, a swing from the positive $1.3 million cash flow realized last year.

Nine-month cash flow is down 34.5 percent at $10.3 million from $15.7 million.

Black said on the call that he foresees future covenant violations.

The credit facility is only part of $188.7 million in company debt with interest rates hovering in the double-digit range.

Black said working capital requirements, capital expenditures and scheduled interest payments should be covered by operating cash flow and cash on hand through December.

Additional funds, however, will be needed to meet the company's funding requirements next year.

"Needless to say, Black Gaming has some significant hurdles," Black said. "Outside of a newly elected president, not much else appears to be changing in terms of customer sentiment or spending habits."

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. stevem wrote on November 14, 2008 08:00 PM: didn't it just come out a few days ago that mesquite tourism was down like 38%? no way can they go on with that kind of drop in visitors. i post on here a lot and i keep saying wait until after the holidays, there will be some closings on the strip. maybe not whole casinos, but for sure some of the retail space you see. casinocon wrote on November 14, 2008 12:33 PM: Dave, I think you mean pay the PIPER, though paupers would love to get paid too . . . there are a lot of paupers in this economy. Anyway, we might as well boycott Station because the employees are going to lose their jobs anyway. Our economy is officially collapsing, and sending jobs overseas is such a stupid, arrogant, selfish move -- Station Casinos needs to see that the locals DO NOT approve! Let's stage a mass Boarding Pass card shredding and picket! Dave wrote on November 14, 2008 09:25 AM: They all thought the party would go on. Profits increasing year after year and they spent as suck. Much the same as a homeowner who felt rich because of his ever increasing home equity in a bubble that burst and now that homeowner is paying the pauper. The casinos are no different, except the casinos do not share in the wealth of the good times and yet the employees are the first to pay the pauper in bad times. Bobby wrote on November 14, 2008 07:57 AM: None of these peole own these Casinos. The banks own everything. How did you clueless humans allow this to happen? And you all call yourself smart? tw wrote on November 14, 2008 05:52 AM: Yes, do what Stations did..SOP 1. Tighten machines to chase more customers away 2. Cut Rewards Program to chase more customers away 3. Cut employees to make sure there ius no customer service whatsoever. Yes it will work ...if you want a recipe for BANKRUPTCY Say What? wrote on November 14, 2008 05:24 AM: "Revenue declines have accelerated." No problem. Do what Station Casinos did. Fire 40 Americans and hire 40 Mexicans. Party on!