INSIDE GAMING: It's all come tumbling down - Business

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Mar. 08, 2009
Copyright © Las Vegas Review-Journal

INSIDE GAMING: It's all come tumbling down

HOWARD STUTZ
INSIDE GAMING

It seems as if we have a front row seat to Armageddon.

Last week, MGM Mirage told investors it might be labeled a "going concern" by auditors and could default on $13.5 billion in debt. Harrah's Entertainment offered a second debt trade to bondholders to reduce the company's approximately $23 billion in obligations.

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Wall Street is speculating that one or both of the Strip's largest casino operators could wind up in bankruptcy court.

MGM Mirage has 10 Strip hotel-casinos. Harrah's runs eight Strip hotel-casinos. It's possible most of the major hotel-casinos between Spring Mountain Road and Russell Road -- including Caesars Palace, Bellagio, MGM Grand, Paris Las Vegas, Flamingo and Mandalay Bay -- might be considered bankrupt.

Deutsche Bank gaming analyst Bill Lerner tried to quell notions about an MGM Mirage bankruptcy. He said the company is taking steps to stay off the court's docket.

A balance sheet with cash flow, almost $1 billion in cash and $775 million from selling Treasure Island, gives MGM Mirage enough liquidity to cover its debt maturities in 2009 and 2010, Lerner said.

MGM Mirage has other balance sheet options that don't involve the court.

Meanwhile, Phil Ruffin isn't deterred by any of the negativity. At 73, he's almost back on the Strip.

Ruffin made a fortune in oil and real estate when he bought the New Frontier for $167 million in 1998. He sold the hotel-casino nine years later for $1.2 billion. His style made believers out of Las Vegans.

Ruffin earned preliminary approval last week to buy Treasure Island. Gaming regulators said it was good to have him back.

That's the attitude we need.

***

Gaming company stock prices have been pounded in the last 14 months. Just ask MGM Mirage majority shareholder Kirk Kerkorian.

At the market's peak, the 91-year-old Kerkorian's 54 percent stake in the company was valued at $15 billion. A year ago it was down to $9.6 billion. Last week, the value of Kerkorian's stock had shrunk to less than $400 million.

In October 2007, MGM Mirage was $99.75 per share. The current 52-week high is $64.85 on March 25. On Thursday, the casino operator fell to an all-time low of $1.89.

***

Treasury Secretary Timothy Geithner's appearance before the House Ways and Means Committee last week allowed Rep. Shelley Berkley, D-Nev., to illustrate the ailing Las Vegas economy.

Berkley, a member of the committee, said one Strip hotel's occupancy rate dropped to 27 percent. She didn't name the property.

However, she urged Geithner to support a pair of tax provisions. One would allow a 100 percent deduction for business meals. A second would restore the spousal travel tax deduction.

"Both provisions would be good for tourism and the convention industry," spokesman David Cherry said.

Howard Stutz's Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871. He blogs at lvrj.com/blogs/stutz.

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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. Report abuse Moe Greene wrote on March 13, 2009 12:10 PM: If and when Vegas fully recovers from the current economic turmoil; it won't be do to Obamanomics and/or Pres. Pelosi's administration. No liberal socialist democratic from NY, PA, DE CA, CT, IL, NJ or NV gives a hoot if Las Vegas turns into a dustbowl. Anyone who voted for Nobama and/or a DEM congress run by folks like Nevada's own Harry "I'm not Howard Hughes" Reid has signed their own pink slip. Dems only no one thing, how to spend other peoples money. You would think the readers of this paper would have known better than to bash their own lifes blood and hand full control of the already wounded economy over to the likes of Frank, Dodd, Waters and other free economy capitalist haters. Las Vegan's better start learning Chinese because that's who you all will be working for and seeing at the casinos. >< -- Report abuse bigdickdaddy wrote on March 13, 2009 02:05 AM: I say, bring back the mob .50 cent blackjack $1 dollar bottle beer .99 cent buffets Report abuse jimbones wrote on March 11, 2009 10:44 AM: Vegas, you gambled and lost and the pain is going to get much, much worse. It's time for Vegas to go Bye Bye. It's over, you're done. We'll see you on the scrap heap of history. Report abuse Entertainment Insider wrote on March 09, 2009 05:52 PM: Las Vegas will bounce back, and better than ever. There's still more people than ever in Las Vegas, so the number of casinos and resorts tends to make sense. I'm not saying you won't see at least one major closure, but Vegas will bounce back. A group of aggressive young investors could come into that town right now and change the landscape. With stocks so damn cheap, some kind of weird-forced-mega merger would be exciting. Report abuse Vegaas Posse wrote on March 09, 2009 01:00 AM: Yo, all you liberal a..holes out there, it was DEMOCRAT Barney Frank who pushed for SUB-PRIME LENDING... SO EVERYBODY COULD OWN A HOME>> get the facts right. Report abuse willy wrote on March 08, 2009 11:44 PM: Hilarious, a bunch of people who don't know jack about accounting picking on a writer. Get it right people, the accounting world says "going concern" when a company has some material reason to be suspected of being in trouble. Problem is the accounting profession gets bamboozled half the time and things like Enron weren't a "going concern" until it was way too late. Well then again with a stock price at $2 I think its obvious they are a risk to go BK. In any event does anyone really care who owns these things? If you own the stock you do, but if you are a typical Las Vegan you just see buildings and you see people going into them. Maybe you work there, but the paycheck will still be coming whether its MGM as owners or someone else. Very few casinos will close out of all of this and that is precisely the problem. We need closings, a bunch of them and we will finally have the creative destruction that has served our economy well over its history. Report abuse fools wrote on March 08, 2009 06:52 PM: RE: LV broke wrote on March 08, 2009 04:07 PM: Name one black politicians who successfully managed an economy. Answer, moot question. no history or statistics. I'll give you one better than that. When has a republican ever successfully managed an economy without at least one major recession? Report abuse ZW wrote on March 08, 2009 06:44 PM: It is especially irritating as to the Core Perpetrators with emphasis on those at the TOP of the Lending Chain in the Mortgage Industry "WHO" EACH SOLELY made all this possible, despite over-extended Prime borrowers who resorted to sub-prime exotic type loans also as long as this Easy Money - Just FIX-the-DOCS to Qualify, APPS, FALSELY APPRAISED & VALUATE SCAM lasted, and Sub-Prime borrowers being culpable in their part in all of this, is "WHY" all this is happening, and what amounts to the CURRENT SILENCE, RATHER than ACTION AGAINST THOSE responsible, who are the ARCHITECTS of this financially disastrous period in American history. This CRISIS is COMPLETELY MAN-MADE. I am a always a Forward-Moving-and Thinking-Personality type. HOWEVER, it's HIGH time, & that time is NOW, to prioritize, and to PROSECUTE, STARTING FROM THE TOP. The Letter of Law is clear, and excludes "NO ONE!" Prosecution of those KNOWN RESPONSIBLE will raise confidence in our government and their OWN RESPONSIBILITY in what to do. I KNOW LAS VEGAS & OUR COUNTRY WILL RECOVER! I also know, this expectation is not comforting to those displaced WORKERS individuals who have done the right thing in their jobs in LV, only to lose it from the criminal, irresponsible, & obvious unqualified acts of a few in Corporations who knew FULL well every SCAM, SCANDAL, OR CON must end. These culprits have done deep damage to the well-being of millions for which their is no excuse. JUSTICE is to PURSUE them. TRY & CONVICT. And place them in confinement, not a country club, condo-like setting ASAP. This will restore the Public's confidence and trust. Report abuse Rob L. wrote on March 08, 2009 05:40 PM: fools wrote: "When are the republicans and Bush going to take responsibility for this mess they created? NEVER!" I think they took responsibility in a pretty big way in November. There hasn't been a beat down like that in quite sometime! Report abuse LV broke wrote on March 08, 2009 04:07 PM: Name one black politicians who successfully managed an economy. Read All Comments