Storm dampens companies’ profits

By Liz Benston (contact)

Thursday, Sept. 26, 2002 | 11:05 a.m.

The closure of all Mississippi Gulf Coast casinos due to Isidore may have a negative, though short-term, effect on some of the industry's largest casino companies, some Wall Street analysts say.

Among those closed were MGM MIRAGE's Beau Rivage, Park Place Entertainment Corp.'s Grand Casino Biloxi and Grand Casino Gulfport, Penn National Gaming Inc.'s Bay St. Louis and Boomtown casinos and Isle of Capri Casinos Inc.'s Biloxi casino.

Those properties respectively account for 5.3 percent, 24.9 percent, 8.1 percent and 8.6 percent of each company's cash flow, said Jason Ader, a gaming analyst with Bear, Stearns & Co.

In the New Orleans area, the Harrah's casino near the French Quarter remained open. But Pinnacle Entertainment's Boomtown, Boyd Gaming Corp.'s Treasure Chest and Park Place's Bally's were evacuated.

Most, if not all, of the properties have business interruption insurance that would stem losses should they remain closed, Ader wrote in a research note.

"However our discussions with operators would lead us to believe that the closings are more precautionary than necessary at this time and that business should resume by Friday."

Goldman Sachs analyst John Kempf also called the closures a "cautionary" move, as the hurricane has been downgraded to a tropical storm. While heavy rains could lead to some flooding in the region, "we do not expect any of the casinos to suffer substantial physical damage," Kempf said.

September gambling revenues will probably be hurt, however, he said. The last time casinos were closed because of weather was in Sept. 1998 for hurricane George, which resulted in a 7.1 percent decline in revenues for the Gulf Coast market, he said.

An emergency crew and other local officials in Mississippi expect to offer their first assessment of the damage this afternoon. Officials have given no indication yet on when the properties will reopen.

The roads that run in front of the casinos have been inaccessible due to flooding, said Mississippi Gaming Commission spokeswoman Leigh Ann Wilkins. Casinos have sustained no major damage, though the Treasure Bay casino has some minor exterior damage, she said.

The three New Orleans water-based casinos remained closed this morning, with state police monitoring the situation, a Louisiana Gaming Control Board representative said. Regulators there have also given no estimate on when they may reopen, the representative said. Harrah's land-based casino in downtown New Orleans was open.