PDS terminates deal to buy casino

Wednesday, April 26, 2000 | 10:39 a.m.

The Las Vegas financial company that last month offered to buy the Four Queens hotel-casino has terminated the deal.

The president of PDS Financial Corp., which offered to buy the landmark downtown property from Elsinore Corp. for $30 million, said today the company could not reach a definitive agreement with the seller.

"We're disappointed," said PDS President Peter Cleary. "It's one of those things that we put a lot of time and sweat into it, but couldn't reach an agreement, so we shook hands and left it on the table."

Cleary would not disclose the sticking point that prevented the deal from being completed, but said it was not a financing problem.

Bruce Waterfall, the New York-based chairman of Elsinore Corp., was traveling today and could not be reached for comment. His attorney had no comment. Another company representative said the Four Queens is still on the market and that "and handful of bidders" are still actively pursuing the purchase of the property.

When the proposed sale of the 690-room property was announced last month, gaming analyst Dave Ehlers of Las Vegas Investment Advisors questioned how PDS could complete the deal with $82 million in debt and only $10.3 million in equity.

Ehlers said there could have been any number of scenarios that prevented the deal from getting done, most of them involving money.

"Maybe there was a breakup fee (an expense to PDS if the deal wasn't consummated) that they didn't want to deal with," Ehlers said. "Maybe they (PDS) just wanted those guys to shampoo the rugs and fix the plumbing and the Four Queens wouldn't go for it."

Cleary said PDS would continue to pursue other deals in the gaming industry. The company provides financing for equipment leases to casinos and sells refurbished gaming devices. When officials announced the deal in March, they said it was a bid for the company to extend its investment in the gaming industry.

Cleary said the company had planned to form a third division -- gaming operations -- to complement its financial and products divisions, called Finance and PDS Slot Source, respectively. Cleary said the company will still form the gaming operations division to pursue other deals. He said PDS has nothing on the table at present.

Earlier this month, Elsinore reported revenues increased from $55.9 million in 1998 to $56.8 million in 1999. The company lost $1.27 million in 1998, but a $960,000 profit in 1999 did not include dividends paid on preferred stock. After those dividends, Elsinore had a loss of $136,000 for the year, or 3 cents a share applicable to its common stock.

The company said the revenue increase could be attributed to a reduction in casino and slot marketing expenses.

Last month, PDS issued its 12-month results, reporting revenue of $35.5 million in 1999 compared with $36 million in 1998. The company reported a net loss of $739,000, 20 cents a share, in 1999, compared with net earnings of $356,000, 10 cents a share in 1998.

The company attributed the losses to financial difficulties experienced by two customers in 1999, adding that loans were restructured and the companies have resumed making regular payments.

Today, Elsinore stock was trading at $1.625, down 75 cents from Tuesday's closing price of $2.375. PDS stock was at $1.19, down 6.25 cents from the Tuesday close of $1.25.