Las Vegas Sun

October 23, 2014

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Reports: Gaming revenue down, casino debt climbing

Casino debt climbed to nearly $93 million downtown, $773 million on Strip

More bad news affecting Las Vegas' economy came out of two reports released Friday: Financial analysts are saying 2008 gaming revenues for Nevada and the rest of the country are down and that Las Vegas casinos are piling up significantly more debt.

Fitch Ratings, a global credit ratings agency, said U.S. and Nevada commercial and racetrack casino revenues fell 3.5 percent in 2008 to an estimated $36.2 billion. Fitch said the rating would have been much worse if not for emerging markets like Pennsylvania and New York. The declines since September were notably worse than the full year, Fitch said.

In Fitch’s 2009 gaming outlook report released in December, the agency said the U.S. gaming industry will remain under significant pressure in 2009 and will likely recover in 2010. Fitch expects overall consumer spending to drop by 1.6 percent in 2009 and remain soft until 2010.

Seven gaming companies defaulted on more than $13 billion of high yield principal in 2008 due to heavy debt loads, a difficult credit market and strained liquidity, Fitch said. Station Casinos may soon join that group as it is on the cusp of defaulting on an additional $2.3 billion after its failed debt exchange offer in December.

Jefferies & Company, an investment bank and securities firm, said Las Vegas casino operators like Hooters, Fontainebleau, Black Gaming, Cosmopolitan and Herbst (owners of the Terribles chain) are at a higher risk for defaulting on loans. Harrah’s and Station Casinos are at an even higher risk, Jefferies & Company says.

Leverage in every Nevada gaming market is the highest it has been in 17 years, the firm said in its Friday report.

Jefferies & Company reported in the Nevada fiscal year, average Strip casino net debt jumped from $391 million in 2007 to $773.4 million in 2008. Average Las Vegas Downtown casino debt rose to $92.9 million from $6.7 million in 2007. Jefferies & Company said debt significantly rose related to the building of CityCenter, Encore, Cosmopolitan, Fontainebleau and privatization of Harrah’s.

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