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Moody's report says casino companies in fragile position
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LAS VEGAS REVIEW-JOURNAL
Nevada's fragile recovery in gaming revenues could be shattered by even a minor blip in the national economy, causing major financial problems for many Las Vegas casino companies, a leading bond rating house said Tuesday.
Moody's Investors Service in a special industry report noted that comments from the Federal Reserve concerning a slowdown in consumer spending and continued high unemployment raises red flags for the local gaming industry.
Moody's Senior Vice President Keith Foley said the problems could prompt ratings downgrades for casino companies, which would in turn hamper their ability to borrow money.
"We are concerned that consumers' propensity to spend on gaming activities will not withstand another hit to their wallets, even a small one," Foley said.
The Fed's Open Market Committee report of June 22 painted a dour picture of the U.S. economy. Among the issues cited were the federal deficit, spillover from the European debt crisis, high unemployment and the housing recession.
Hammered by years of recession, Nevada's gaming industry has been plagued by bankruptcy filings, job losses, the sale of properties and billions of dollars in debt restructuring.
Moody's singled out two major Las Vegas-based companies, Caesars Entertainment Corp. and MGM Resorts International, saying they are more vulnerable than their competitors.
Foley said Caesars and MGM Resorts are "more reliant on continued economic improvements to grow out of their high (debt) leverage than higher-rated companies are."
MGM Resorts, with $12 billion in debt, faces "significant near-term debt maturities," the report noted.
Caesars, a privately held gaming company, has no significant debt maturities until 2015 but does have long-term debt of $18.5 billion .
The report also said Las Vegas-based Boyd Gaming Corp. and Pinnacle Entertainment Inc. face near-term issues because of economic challenges.
Both companies were credited with "lowering their expenses" and creating "a significant amount of breathing room in their covenants and debt maturity schedules."
But Foley cautioned, "they are highly leveraged and have company-specific, near-term risks that could be exacerbated if consumers decided to curb their gambling budgets."
The report noted companies with large Asian holdings, such as Las Vegas Sands Corp. and Wynn Resorts Ltd., are better positioned than are firms concentrated in the U.S.
"This region continues to experience strong and growing visitation and consumer demand trends, which we expect to continue for the foreseeable future," Foley wrote.
Visitor arrivals in Macau, for example, increased 9.4 percent year-on-year to 2.3 million in May, according to the Statistics and Services Bureau. Las Vegas visitation rose 4.8 percent in April from 3.19 million in April 2010 to 3.35 million this year, according to the Las Vegas Convention and Visitor Authority.
The Moody's report cited Penn National Gaming Inc., owner of the M Resort, as a company that has diversified its operations into a leading market position.
Foley also said he expects MGM Resorts to benefit next year from a rebound in group and convention business in Las Vegas. Higher room and food and beverage will help the company offset to some degree an expected sluggish gaming demand. However, earnings growth alone "will not be enough to reduce leverage by any material degree," the report said.
Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.
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Harrah's, I mean Caesars Entertainment illegally remodeled thousands of their hotel room at several of their properties leaving every single room that they touched unsafe for the public to stay in...every single room! These illegal remodels spanned a period of time over a decade in length, were pre-planned & willful. If it weren't for their "friends": the Nevada Gaming Control Board; Clark County Commissioners; DA David Roger; the Clark County Building & Fire Departments (excluding Brian Kern & Suzanne Miller), but including Chief Smith, Chief Page & Sandra Baker, Ron Lynn & RICHARD MADDOX - the Clark County Supervising Inspector who submitted a fraudulent report closing the original RIO investigation; Governor Gibbons; Senator Harry "Cleanface" Reid; Attorney General Catherine Cortez Masto; LVMPD; Nevada OSHA & Federal OSHA; State & Federal EPA; etc...etc... - Harrah's would have been held accountable for their willful criminal acts under the fine leadership of Gary Loveman! DA David Roger intentionally withheld information to keep Harrah's from being prosecuted for their illegal criminal acts. All the above mentioned "friends" are well aware that Harrah's also intentionally/willfully exposed, at a minimum, tens of thousands of hotel guests, hotel workers & construction workers to asbestos during the course of many of these illegal remodels. Knowingly and willfully exposed all of us to a known carcinogenic. Harrah's/Caesars has no ethics and doesn't give a damn about anything other than their precious bottom line. The only people that actually did something to expose the corruption were Joan Whitely, the RJ reporter that broke the story and stuck with it until she was let go by management and of course Michael Kessler of Kessler International, who called it for what it was and is here in Clark County NV: a cesspool of CORRUPTION! I for one would take great pleasure in seeing Harrah's go bankrupt...ethically & morally they already are...
It's the economy, stupid.
It's been the problem for 4 years now.
Moody's they are the same people that rated CDO's loaded with SubPrime Mortgages, AAA that built the house of cards that destryed the housing market and our city, any of their OPINIONs are worthless
Oblamea has done a great job in sinking Nevada and it's citizens. Aren't you glad you voted for the SOB.
Just keep ripping off the tourist and I'm sure they'll all start coming back and save your sorry butts. These casino operators think they can keep ripping off the tourists and they will never wake up and spend their money where they get their money's worth!
$787 Billion well spent Obama. Resulted in unemployment increasing from 7.8% to 9.1%.
4.7, 5.8, 6.0, 5.5, 5.1, 4.6, 4.6, 5.8 - "now those days are gone"
How soon we forget the unemployment rates from 2001 to 2008.
Kieth most of the big casinos have restructurd the debt, As for my friends at Caesars 18.5 billion in debt , you will see this co. go BK Gary wants to take Caesars in a IPO good luck, The LV market will never be the same,thats why Lovechecks has all that debt, Good job Gary ,C U IN China Gar, Did you miss the boat?