Thursday, February 25, 2010

Casinos: Harrah's Turns a Profit in Q4 2009 While Station Reaches Deal to Escape Bankruptcy

Whoa, there! In a week filled with bizarre, ugly, and downright wacky news out of Carson City, it looks like things are looking brighter here in Vegas (which may help things in Carson City next year, interestingly enough). Believe it or not, Harrah's turned a profit late last year!

Harrah's Entertainment Inc. today reported a profit of $295.6 million in the fourth quarter, even as the recession contributed to a 10 percent decline in net revenue for its big hotel-casinos on the Las Vegas Strip.

The profit compares to a loss of $4.782 billion in 2008's fourth quarter, when the Las Vegas company booked special costs of $5.49 billion to write down the value of goodwill and other intangible assets.

Harrah's attributed some of its profit in 2009's fourth quarter to financial engineering. Its interest expense fell by $118 million in the quarter and it posted a pre-tax gain of $686 million due to debt exchanges and other purchases of its debt at discounted prices.

OK, so much of this profit was "engineered" out of tricky accounting and and playing with its debt. But hey, it's still a profit... Which MGM Mirage and Las Vegas Sands can't say. (Both companies actually reported narrower losses than expected, but still bled a little more red in Q4.)

Oh, and now for the other big casino story of the day... Station has a deal??!!

Station Casinos Inc. today announced it has reached an agreement with key lenders that the company hopes will clear the way for it to receive approval to emerge from bankruptcy this summer.

While the company didn’t disclose details, the arrangement with lenders holding $2.475 billion of debt secured by four of Station’s most valuable hotel-casinos is expected to result in the lenders swapping some debt for equity in the company. [...]

[T]he deal- if approved — would keep the company and its 18 casino properties and extensive land holdings together.

It’s expected members of the founding Fertitta family, along with Station majority owner Colony Capital of Los Angeles, would maintain equity stakes.

The Fertittas would make a substantial, but undisclosed, equity investment and the current management team led by Chairman and Chief Executive Frank Fertitta III would continue to lead the company.

“We are extremely pleased to have reached an agreement in principle with certain of our key mortgage lenders for the comprehensive reorganization of our Company,” Fertitta III said in a statement. “This is a very important step in our restructuring process. Our commitment to the successful restructuring of our company is demonstrated by (my brother) Lorenzo and me making a significant investment in the reorganized company. This restructuring will create a much stronger company going forward that will benefit our team members, guests and the Las Vegas community as a whole.”

WOW! Honestly, I really wasn't expecting this. After all the recent controversy over what Station has been doing, it was starting to look inevitable that Boyd would "do some bargain hunting" in bankrputcy court. If this holds, Station might just survive.

So perhaps the worst is over? Maybe, just maybe, we can really start to believe it now. Station was starting to look like "The Meltdown of The Millennium", while Harrah's was really looking doomed with all its debt load and casino losses all over the country.

But apparently, tomorrow is another day... And that brighter tomorrow looks to be starting today.

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