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May 20, 2008 2:13 pm US/Eastern
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Wall St. Crunch Will Weed Out Poor Casino Plans
ATLANTIC CITY, N.J. (AP) ―
The credit crunch that is delaying some casino plans is nearing an end, even though it still may kill some poorly conceived projects, a panel of Wall Street experts said Tuesday.
Speaking at the East Coast Gaming Congress, officials with Wall Street firms said credit is still available, although at a higher price.
Joel Simkins, senior vice president of Macquarie Securities, was asked to compare the duration of the credit crisis to a baseball game.
"I'd say we're in the bottom of the sixth," he said. "i think we're nearing the end of the credit crisis. You have investors starting to come back and look at the sector, and you have vulture investors coming in to look at distressed properties.
"Deals are still getting done, and credit markets are opening back up," he said.
In Atlantic City, proposed projects by Pinnacle Entertainment and Revel Entertainment have been affected by credit markets; Pinnacle has said it may abandon its Atlantic City plans if credit markets don't improve within a year or two.
Lawrence Klatzkin, managing director of Jefferies & Company, said he thinks both Pinnacle and Revel will ultimately build their Atlantic City projects.
John Maxwell, managing director of Merrill Lynch, said credit markets are open now, although at a more expensive price for borrowers. He said the tighter credit has made gambling companies look more closely at their
plans.
"Maybe a new project in Atlantic City is not at the forefront of that," he said.
He also said it will be interesting to see what the Tropicana Casino and Resort sells for in Atlantic City. The property's former owners were stripped of their casino license in December after less than a year of poor performance, and the Tropicana is up for sale.
Maxwell and Simkins both predicted it will sell for less than $1 billion. Klatzkin predicted the price will top the $1 billion mark.
One potential suitor who has dropped out of the Tropicana sweepstakes is the Mohegan Indian tribe in Connecticut. Mohegan Sun CEO Mitchell Etess said the tribe had been considering a bid several months ago, but decided against it.
"The deal just didn't make sense for us," he said.
Etess said the Mohegans are still interested in expanding to Atlantic City, and are looking at existing casino-hotel properties. But he said no deal was imminent.
Within the next five years, all three panelists predicted even more competition in the East Coast gambling market, including the possibility of casinos or slots parlors in Massachusetts, Maryland and Ohio.
(© 2008 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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