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Published Wednesday, July 30, 2008 | 3:55 p.m.
Updated Tuesday, Oct. 28, 2008 | 10:15 a.m.
With banks tightening their belts and consumers tightening their wallets, it's a good time to be Frank Merola.
As a bankruptcy attorney specializing in the casino business, Merola – who today joined the restructuring team at investment bank Jefferies & Co. – has been involved in just about every major Chapter 11 case in gaming for the last 15 years.
And he's a gaming insider who grew up in Las Vegas, where his father served as a floor supervisor, pit boss and casino manager at several casinos including the Sahara, Aladdin and Riviera.
Which makes him somewhat of an expert in downward business cycles. While it's unclear whether this one is the worst, it's certainly the worst in the modern casino era, Merola said. Casinos, including those on the Las Vegas Strip, are facing increased competition and are more dependent upon nongaming sources of revenue like restaurants, shows and hotel rooms that are more cyclical than gambling revenue.
More importantly, casino companies are more highly leveraged today than ever, having borrowed money that was cheap and abundant just a couple of years ago, when business was booming, Merola said.
Like a doctor discussing the aging process, Merola says these factors, combined with the recent downturn, make bankruptcy "inevitable" for some companies.
He has represented both creditors and debtors including the Stratosphere and Arizona Charlie's casinos and the former Aladdin and Resort at Summerlin properties in Las Vegas and the former Trump Hotels & Casino Resorts in Atlantic City.
He most recently represented holders of $960 million in bonds issued by Tropicana Entertainment, which filed for Chapter 11 bankruptcy protection in May after New Jersey regulators forced the company, which owns the Tropicana in Las Vegas, to sell its sister property and major profit center in Atlantic City.
Casinos in smaller or relatively untested markets are most at risk for bankruptcy but there are a handful in Las Vegas that are near the brink, he said.
"These are healthy companies that just borrowed too much money," he said. "They're doing well and making money and they're not at risk of closing. But the amount they borrowed is more than they can pay."
The greedy casinos, with their insatiable appetite for squeezing every cent out of every visitor to Las Vegas, have brought this on themselves. Good riddance to some of them.
Further comments: http://www.thebeargrowls.com/?p=131
I agree LVBear. They especially went wrong by scamming their locals out of money like they do tourist. Now they're begging for the local dollar. I get emails sent to me every week with discounts for locals. Screw them! I hope those greedy suckers lose everything!
I think Station Casinos is one of the healthy companies that borrowed too much. They announced a delay in earnings reporting so their auditors can 'fix the books', er I mean finish auditing the books for release. I think the Fertitas 'withdrew' too much money from the privatization and since Stations is over capitalized, they are having a rough time servicing debt, given the downturn in the economy.
In a post-gaming era, Nevada will be receiving billions of dollars in franchise fees on electricity from hundreds of square miles of DEEP-well geothermal in broad swaths across our vast deserts. DEEP-well hot water-to-steam-to-turbines-toelectricity-to export to the entire West. Can I see a show of hands of those willing to go from their parking lights to their high beams??
Greedy casinos. I wonder who keeps the lights on and the engine running. Without gaming this state would be one big horse farm and everyone would need to move.
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