Speedway Casino owner refinances debt through Wells Fargo Bank deal

David Strow

Wednesday, Dec. 29, 1999 | 10:52 a.m.

The owner of the Ramada Inn and Speedway Casino in North Las Vegas has refinanced about $33.4 million in debt.

MTR Gaming Group Inc. of Chester, W.Va., said it took out a $30 million credit line with Wells Fargo Bank. The credit line, together with MTR's cash on hand, was used to pay off a $33.4 million outstanding loan.

With the loan, MTR lowered its interest rate from 13 percent to 9.25 percent, and will make interest payments quarterly, rather than monthly. The old loan was scheduled to mature in July 2001; the Wells Fargo loan is for five years.

The loan's interest rate varies by MTR's debt-to-cash flow ratio and may be reduced by up to one percentage point should the company reduce its debt load.

However, the loan puts significant conditions on the company. MTR was required to pledge all of its assets as collateral on the loan. It must also take out at least $8 million in key man life insurance on its president, Edson Arneault. Further, MTR Gaming is required to spend 2 percent to 6 percent of its gross revenues on the maintenance of its properties.

MTR owns the Mountaineer Racetrack & Gaming Resort in West Virginia, the Speedway Casino in North Las Vegas and the Speakeasy Casino in Reno.

MTR paid a 2 percent closing fee to Wells Fargo, or $600,000. It paid an additional $450,000 to its financial adviser, Friedman Billings Ramsey & Co.

David Atwell, a Las Vegas hotel-casino broker, said the terms of the loan were favorable for a company of MTR's size.

"It doesn't sound unusual," Atwell said. "There are different negotiated terms than when you're talking about a huge company."

The conditions placed on the loan help offset the lower interest rate for Wells Fargo, Atwell said.

Separately, a prominent California investor targeted MTR as a stock to watch in January, giving MTR shares a boost Monday.

CBS MarketWatch quoted Glenn Cutler, a former fund manager, as saying the company's strengthening cash flow was improving its prospects.

"Cash flow is huge; the main business is generating lots of money," Cutler told MarketWatch. "New properties purchased last year (in Nevada) are crossing over from losing money to making money in the gaming/horse racing business."

Cutler targeted stocks expected to benefit from "the January effect," which refers to investors' tendency to invest heavily in small cap stocks around the beginning of the year.

MTR rose 56 cents to $3 on Monday. On Tuesday, the stock gained another 19 cents.