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With Echelon project delayed, Boyd eyes Station Casinos

Boyd Gaming Corp. has put the brakes on its $4.8 billion Echelon project for at least three to five years. But the casino operator has an idea of how to spend the money it raised for the Strip development: acquire a large chunk of Station Casinos out of bankruptcy.

During a conference call today with analysts, Boyd Gaming Chief Executive Officer Keith Smith said Station Casinos executives dismissed the company’s Feb. 23 offer to purchase a significant portion of its rival for $950 million as a half-hearted gesture.


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  • Smith said the bid is real. Boyd Gaming has a $2 billion credit revolver designated for Echelon that can now be directed toward acquisitions. 

    “Let me be clear. This is a serious offer,” Smith said in prepared remarks today. “Bankruptcy can be a distracting and expensive process, and it does not appear to be in the best interests of anyone for this to drag on.”

    Station Casinos filed for Chapter 11 bankruptcy protection at the end of July. Last week, company attorneys asked the court to extend a deadline for the exclusivity period for filing a plan of reorganization until March.

    After the earnings call, Smith said buying key assets within Station Casinos’ 18-property portfolio in Southern Nevada makes sense for all parties, including Boyd Gaming shareholders, customers, and Station Casinos’ creditors, employees and customers.

    “We can deliver more value to the creditors with a fair offer and these assets,” Smith said. “We believe strongly in the long-term viability of the Las Vegas market.”

    Station Casinos declined to comment.

    Smith added that Boyd might be interested in acquiring “distressed” properties and looking at opportunities in regional gaming markets.

    Boyd Gaming suspended construction of Echelon on the site of the former Stardust more than a year ago, saying it would consider restarting efforts after this year. However, the continuing recession and the December opening of CityCenter may continue to depress the Las Vegas market.

    “Given the ongoing weak economic conditions, the significant new supply coming online and a difficult capital-market environment for projects of this nature, resuming construction in the near term is not an option,” Smith said.

    It will cost Boyd Gaming $15 million this year to maintain and secure the Echelon site, which has several steel structures in place. The company expects the annual costs to go down next year and has no plans to remove any of the structures.

    The recession also reduced Boyd Gaming’s third-quarter profits. The casino operator said its net income fell about 27 percent in a period that ended Sept. 30.

    Boyd Gaming said its net income was $6.3 million in the quarter, or 7 cents per share, compared with $8.7 million, or 10 cents a share, for the same period a year ago. Analysts polled by FactSet Research estimated that, on average, the company would report earnings per share of 12 cents.

    Boyd said revenue fell 6.6 percent in the quarter to $398.2 million. The company blamed the slump on reduced consumer spending, especially in Las Vegas.

    “Improved results in our downtown Las Vegas, Borgata and Midwest and South regions helped offset softness in the Las Vegas locals market,” Smith said. “While visitation levels remained fairly constant, spend per visitor continues to be down significantly year over year, as consumers are still being cautious with their spending.”

    Shares of Boyd fell $1.90 or 17.79 percent on the New York Stock Exchange to close at $8.78.

    JP Morgan gaming analyst Joe Greff speculated that the Las Vegas economy may continue to suffer into next year, adversely impacting the company’s results.

    “While Boyd has done a commendable job reducing operating costs in the locals market, the headwinds from record Las Vegas unemployment and foreclosure activity, which we believe will take some time to improve, are proving to be too much as it relates to net revenue growth, something we do not see as a 2010 events,” Greff told investors.

    Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

     

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    Exgambler wrote on November 02, 2009 10:13 PM: Man I miss the stardust. My favortie time in vegas was 98-04 then it became a wannabe holloywood nightclub scene and ruined the games, service, and the vibe that I used to love about vegas.

    oh yeah and liberals are economic fools that have no idea how the free market works... tax rich people huh?? LOL. rich people create the jobs.


    Trick Or Treat wrote on October 31, 2009 04:09 PM: Even though Boyd is run by morons, they are the lesser of 2 evils. Stations glory days are long gone and the employees of Stations deserve better.


    Mark Szczygiel wrote on October 28, 2009 11:55 AM:
    republicans are back at it again, the tax cut cycle continues indefinitely however. Not sure Obama needs to make a clear move here.


    - Mark Szczygiel
    Texas


    dt wrote on October 28, 2009 07:53 AM: republicans have been enacting tax cuts for 20 of the last 28 years and where has it gotten us as long as the rich are the only ones benefitting from our economic policies this country will continue our downward spiral. The rich dont create jobs the middle class and the poor people do our economy is 70 percent consumer spending when we dont have decent paying jobs we have no money to spend it doesnt matter how many businesses we have when people have no money to spend because we have no good paying jobs the have all been shipped overseas the only way to fix the problems in this country is to have public financing of campaings, bring back our conflict of interest laws for politicians, and get rid of the lobbyists


    Common sense wrote on October 27, 2009 05:24 PM: You Obama haters should try and find some. Now I am not a Democrat by any stetch of the imagination, but you guys that are blaming Obama for this mess need to get your heads out of McCain's butt. How in the world was Obama supposed to fix the mess W got us into in this short of a time period? It can't be done. It's real easy to sit on your couch and judge what the President is doing with the country, but the truth is you have no idea what you're talking about.

    But I know the logic you use. Never let the truth get in the wy of a good argument.


    Mark Turmell wrote on October 27, 2009 05:00 PM: As I told you earlier in the year, thanks to Stephen Horsford, Barbara Buckley, and Bill Raggio, Las Vegas hasn't even STARTED its recession.

    Soon, we will look back on 2009 as "the good old days".

    Problem isn't less spending by all guests, it's the high-end guests that are no longer here.

    Thanks legislature!


    Tax Cuts are the ONLY way to get out of this Obama created DEPRESSION wrote on October 27, 2009 04:18 PM: It is government spending that is holding back any recovery and causing more people to be unemployed. Obama and Reid and Pelosi have made a real mess of things. It's so bad it's called the Obama Depression, because Obama pushed the economy over the edge when he could have save it with reducing spending and massive cutting of taxes.


    I'm the govt and here "to help" YOU! wrote on October 27, 2009 03:59 PM:
    Wise move by Boyd Gaming.

    The current economic environment is not conducive to growth.

    Massive spending by the admin will lead to huge tax increases and the "free" healthcare will be paid by employers and employees alike on a scale unseen.

    Is it any wonder everyone is cutting back and cunsumer confidence is the lowest in 3 decades.


    Echelon Park wrote on October 27, 2009 03:46 PM: The Echelon site would be the perfect location for an awesome city park on the Strip, kinda like a Las Vegas version of New York's Central Park.


    Capital Gains and Games wrote on October 27, 2009 03:42 PM: PART 2:

    Why the Economy Needs Spending, Not Tax Cuts

    by Bruce Bartlett
    -----
    continued:
    ------

    Now let's fast forward to the end of fiscal year 2009, which ended on September 30. According to CBO, it ended with spending at $3,515 billion and revenues of $2,106 billion for a deficit of $1,409 billion.

    To recap, the deficit came in $223 billion higher than projected, but spending was $28 billion and revenues were $251 billion less than expected. Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending.

    It should be further noted that revenues are lower to a large extent because of tax cuts included in the February stimulus. According to the Joint Committee on Taxation, these tax cuts reduced revenues in FY2009 by $98 billion over what would otherwise have been the case. This is important because the Republican position has consistently been that tax cuts and only tax cuts are an appropriate response to the economic crisis.
    -------
    continued:


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