Park Place eyes Illinois casino license

By Liz Benston (contact)

Tuesday, Aug. 5, 2003 | 11:06 a.m.

Park Place Entertainment Corp. has submitted a bid to build a Caesars brand casino in a Chicago suburb -- the first formal news of a bid since the Illinois attorney general announced its intention to revoke the license from its current holder, the bankrupt Emerald Casino.

The bid comes amid news reports that as many as six other companies -- including Harrah's Entertainment Inc., Mandalay Resort Group, an investment group backed by Steve Wynn and Isle of Capri Casinos Inc. -- also have bid on a 10th casino license in Illinois.

Another Illinois casino -- whether in the suburb of Rosemont or elsewhere -- could be far from reality because the license has not yet been put up for bid, observers say. Emerald Casino Inc., which had plans to build a casino in Rosemont near O'Hare International Airport, also is undergoing Chapter 11 bankruptcy proceedings.

The Illinois proposal could result in Park Place having its credit ratings cut to below investment grade by Standard & Poor's.

Park Place's $4.7 billion in debt is rated BBB-, the lowest investment level, Standard & Poor's said in a statement. A reduction may make it more expensive for Park Place to borrow.

The bids are "meaningless as far as the board is concerned," said Gene O'Shea, a spokesman for the Illinois Gaming Board. "There is no license up for bid."

Even if the state pulls Emerald's license and allows it to be reissued, the Gaming Board could decide not to assign it, said Tom Swoik, executive director of the Illinois Casino and Gaming Association.

Casino regulators ultimately have the final authority as to who will obtain the license and where the casino would be located, he said.

The state passed a law this year that allows it to put the license up for bid and has said that it wants to consider all potential buyers fairly.

The bid price likely won't be the only issue, as the state will probably take other factors such as economic development into consideration, Swoik said.

The Park Place casino would be about 40,000 square feet, including more than 1,100 slot machines, 34 table games, four restaurants and four bars and lounges.

The Rosemont site "represents the best opportunity for the state of Illinois to quickly realize significant economic benefits from a new casino" because it is more accessible to a greater potential customer base and because work has already gone into site preparation there, Park Place President and Chief Executive Officer Wally Barr said in a statement.

The casino would stimulate tourism and economic development in the region by attracting locals as well as domestic and international tourists, the company said.

Though Park Place didn't reveal the amount of its bid, J.P. Morgan casino analyst Harry Curtis estimated the investment in the range of $400 million to $500 million including the fee for the license, a buyout of the Emerald investment and construction costs.

The casino could generate cash flow of roughly $70 million to $80 million given a tax rate of 41.5 percent, which could add from 2 to 4 cents per share to company earnings after debt and depreciation, Curtis wrote in a research note to investors today.

"We believe a new casino would likely grow the market as well as significantly impact existing properties (depending on final location)," Curtis wrote.

Curtis said the Rosemont location could have an edge over other locations "given that some site work has been completed and construction of a parking garage has begun" and because the state appears eager to receive money from the license payment as well as taxes on casino revenue.

Swoik said he's not so sure.

The Gaming Board may be reluctant to reissue a license in Rosemont because of the reported problems associated with the site, he said.

Owners of the Emerald Casino company held a license for a closed riverboat casino in East Dubuque, Ill. and attempted to shift the license to Rosemont. State regulators denied the request in 2001, citing "false and misleading" statements made by majority owners Donald and Kevin Flynn as well as alleged links to organized crime of some minority shareholders.

The Gaming Board this year established a settlement agreement with Emerald allowing the license to be sold, but the Illinois attorney general halted the deal, saying Emerald officials should not be allowed to recoup their investment.

The attorney general initiated an administrative hearing to strip the license from Emerald.

The town of Rosemont, saying it was owed money, forced Emerald into bankruptcy. The attorney general won a court order to resume its revocation hearing against Emerald amid the bankruptcy proceeding.

Rosemont is located about 17 miles from downtown Chicago and is near the 840,000-square-foot Rosemont Convention Center. About 6,000 hotel rooms, the 18,000-seat Allstate Arena and the 4,300-seat Rosemont Theater also are nearby.