Barden keeping Fitzgeralds’, other Vegas options open

David Strow

Tuesday, Dec. 12, 2000 | 11:17 a.m.

Under most circumstances, the sale of Fitzgeralds Las Vegas would not be considered a huge deal in Las Vegas circles.

Certainly, the $149 million sale of three casinos does not stack up to the impact of MGM Grand Inc.'s $6.4 billion buyout of Mirage Resorts Inc., or the $3 billion takeover of Caesars World Inc. by Park Place Entertainment Corp.

Yet to those striving for diversity in the gaming industry, Detroit businessman Don Barden's buyout of three Fitzgeralds properties is significant indeed. Barden is the only black businessperson to wholly own a casino company -- and his buyout will make Fitzgeralds the only black-owned casino in Las Vegas. That's a goal local black leaders have been calling for for the past seven months.

"It has the same ramification (for the Las Vegas gaming industry) that Jackie Robinson had to baseball," said Gene Collins, president of the Las Vegas chapter of the NAACP. "It opens all sorts of opportunities for African-Americans, because someone has to be first."

"I totally feel this is a significant step," said Bobby Siller, member of the Nevada Gaming Control Board and the highest ranking black official in Nevada's gaming sector. "It's healthy for gaming, and it's healthy for Nevada."

But Barden says that aspect of the deal never really crossed his mind until recently.

"I never dawned on me that it was the first (Las Vegas casino owned by a black-owned business)," Barden said. "In a sense, we're pioneers, but that was not the motivation. We're pleased people there are happy about it."

"Certainly anything I can do to help accomplish that objective (diversity), I'd be happy to do. I'm an advocate of that, naturally, for women as well as minorities."

If the deal with Fitzgeralds is approved, a Barden-controlled company will acquire the Fitzgeralds properties in Las Vegas, Tunica, Miss., and Black Hawk, Colo. Since Fitzgeralds is in bankruptcy, the deal must be approved by a bankruptcy judge before proceeding -- however, Barden said more than 80 percent of the Fitzgeralds bondholders have already approved the deal.

If completed, the deal will give Barden four casinos, including his Majestic Star Casino in Gary, Ind.

Important markets

"These are important markets in the gaming business," Barden said. "We certainly wanted to be in Las Vegas in some form or fashion, and Colorado is very attractive. We had the opportunity to acquire the three properties at what I view as a very reasonable price."

The Fitzgeralds deal will be anchored with $20 million in equity financing, provided primarily by Barden. Barden's company will assume little debt from Fitzgeralds, but intends to raise as much as $137 million more through bond sales in mid-2001.

"They (the three Fitzgeralds properties) will all be pretty vulnerable to competitive pressures, and the leverage would make it difficult to reinvest in their properties," said Steve Altman, bond analyst with Duff & Phelps in Chicago. "It's questionable ... but he (Barden) has been successful. I guess he sees an opportunity, and we'll see how it pans out for him."

The property in Las Vegas will need some tinkering to be a financial success. In the quarter ending Oct. 1, 2000, Fitzgeralds Las Vegas posted a loss from operations of $700,000, and a 1 percent decline in net operating revenues to $12.3 million. Cash flow was $299,000, up from $123,000.

Growth was healthier over the nine-month period ending Oct. 1 -- cash flow for that period reached $3.3 million in Las Vegas, up 27 percent.

"We can introduce some mechanisms and programs to make it more profitable," Barden said, declining to be more specific until the bankruptcy court approves the sale. The properties will initially operate as Fitzgeralds properties under Barden, though a switch to the Majestic Star brand isn't being ruled out.

Growth in Tunica has been quite strong, with the casino posting $4.7 million in cash flow in the quarter ending Oct. 1, a 61 percent increase. At Black Hawk, however, cash flow dropped 15 percent to $2.3 million.

Over the nine months ending Oct. 1, the Las Vegas, Tunica and Black Hawk properties produced $22 million in cash flow, up 12 percent.

No focus shift

Though black-owned, don't look for a shift to make the Fitzgeralds Las Vegas a black-oriented casino, Barden said.

"We want any segment of the market we can get," Barden said. "We're not going to focus on any ethnic market. But I do think we'll be able to get more celebrity-type people to visit, because we happen to know a lot of them."

Barden has tried unsuccessfully to enter the Las Vegas market before. Two years ago, Barden and entertainer Michael Jackson looked at making a bid for the Desert Inn. The reason it never materialized, Barden said, was price -- Starwood Hotels and Resorts Worldwide was asking $350 million to $400 million for the property, compared to the $270 million casino mogul Steve Wynn ultimately paid for it this April.

"We would have gladly proceeded at that amount ($270 million)," Barden said.

Barden isn't ruling out far larger goals -- one, taking his company public, and two, expanding his presence onto the Las Vegas Strip. But Barden and his company's officials are trying to downplay reports that such moves could come next year.

"I think some things were taken out of context," said Mike Kelly, chief financial and operating officer of Majestic Star. "We clearly believe that's an option we should explore, but I'm not in a position to say we'll go down that path, because we're not, currently. It's an option all companies consider as they continue to grow."

"The point is, we will keep our options open," Barden said. "In the future, we'd like to look at that, but nothing's on the drawing board at this moment. We want to demonstrate performance on the ones we're acquiring, then, depending on market conditions, we'll make an assessment at that juncture. Right now, the focus is on enhancing operations at these properties."

And Barden wouldn't rule out the possibility that Jackson might still join him in a Las Vegas venture.

"It is possible," Barden said. "I don't know if he's still interested. He's pretty busy travelling internationally."