Casinos: It's Official, MGM Resorts Intl., Moody's No Longer So Moody on Vegas,

So before I come home later today, I want to catch up on some of the important gaming news I've been missing.

- It's official, MGM Mirage is now MGM Resorts International. The company says they did it to "better reflect the resort developer's global presence as it expands in Asia, the Middle East and elsewhere", but I'm wondering if this means The Mirage will be up for sale next. MGM Resorts denies it (wow, I need to get used to saying "MGM Resorts"), but we'll see. Whatever they want to call themselves, they still have $13 billion total debt. And while they are making progress in paying it off, they may need more cash on hand soon if they intend to fast-track more debt payments and/or buy Cosmopolitan to integrate it into CityCenter and/or restart stalled renovation projects for their other casinos.

- In some much appreciated good news for the gaming industry, Moody's has upgraded is overall outlook for gaming from "Negative" to "Stable".

"Although monthly gaming revenue by jurisdiction varies considerably, overall, U.S. gaming revenue was flat year-over-year in March and April 2010, and it appears the trend will hold for May," Keith Foley, senior vice president at Moody's, said in a statement. "While not a stellar performance, it's a marked improvement over the consistent -- and often substantial -- declines of 2008 and 2009. It also has favorable implications for gaming company operating profits, a majority of which comes directly from slot machine and table game revenue."

While Moody's is not yet all-out bullish on gaming (they later noted the continuing struggle to get more tourists to spend more money), it at least reflects Wall Street's re-embrace of the casinos after going so sour on gaming in 2008 and 2009.

- There's some increasing controversy over online hotel reviews and who's actually doing the reviewing. Apparently, paid casino promoters are now taking to sites like Expedia, Yelp, and TripAdvisor to shill for their clients and/or attack their clients' competitors. I guess the 'net is always prone to this kind of abuse. Whatever. The travel sites say they're cracking down on it, and the casinos deny that they pay people to do this kind of sh*t. And moi? Well, I have ways of determining which reviews are real and which aren't... And ultimately, it isn't these anonymous reviews that make my hotel decision for me.

- $1.2 billion in Fontainebleau contracts have been pulled... So construction will be resumed soon? Not so fast. Carl Icahn has said for some time that he wants to wait until Vegas stabilizes some more before he finishes F-bleau, so we can't be so sure this is a sudden change of heart.

- And finally, Steve Friess recently did an interview with Donny Osmond. He talks about the recent death of Marie's son, their return to The Flamingo, his "teen fame" in the 1970s vs. Justin Bieber mania today, and more. As always, Mr. Steve keeps it interesting!

And that's all for now. I may pop out one more blog post before I fly out of Long Beach this afternoon, and I promise to resume regular Nevada blogging later this week once I settle back into "life in paradise".

Casinos: Whither Circus Circus? The North Strip?

One upon a time, Circus Circus was MGM Mirage's most profitable casino. Ever since Jay Sarno was forced in the early 1970s to sell his then failing experiment to Bill Bennett, Circus Circus was transformed into a supreme moneymaking "grind joint" with low operating costs allowing the casino to make loads of money off low rollers.

However, this has changed. In less than two years, Circus Circus went from MGM Mirage's biggest moneymaker to its biggest money loser.

Circus Circus used to be fed by pedestrians coming up its way from the New Frontier, the Stardust and Westward Ho, but those resorts are gone. The detrimental effect has been considerable, MGM Mirage spokeswoman Yvette Monet says.

The next-door neighbors that Circus Circus has left are having more than their share of economic troubles, too. Financial figures aren’t available for the Sahara because it is privately held, but the property has been closing some of its rooms now and then to save operating costs. The Riviera reported a $5.6 million loss in the fourth quarter and is negotiating with creditors to restructure the company’s debt, which may include seeking bankruptcy protection.

For that same quarter, Circus Circus was MGM Mirage’s biggest money-loser on the Strip.

After expenses, the resort posted a loss of $3.4 million in operating income. It earned only $4 million in operating income for all of 2009, down from $33.7 million in 2008.

So why is this happening? Two reasons. First off, the recession forced the casinos into a "musical chairs price war" and downscale hotels/motels like Circus Circus have been left standing... Without a chair.

Circus Circus is a lower-rent property, and analysts and executives say budget properties are suffering as customers upgrade to well-appointed resorts that are offering deep discounts. If tourists can pay just a little bit more to stay at a more luxurious, newer hotel, they do it.

The industry has a name for this trend: price compression.

Think about it. Circus Circus regularly offers rooms for under $100 per night... But today, the same can be said of a number of more upscale Strip hotels. And for only $20-30 more per night, wouldn't you want to upgrade to, say, Luxor, Monte Carlo, or New York New York?

And speaking of that end of The Strip, that's the other reason why Circus Circus' fortunes have so suddenly changed. Much of The North Strip now consists of mothballed "skeletons" of former construction sites, so Circus Circus can't count on pedestrian traffic from nearby casinos like Excalibur can on The South Strip.

Excalibur is more centrally located on the Strip, with more walk-by traffic and proximity to higher-end hotels, and it posted operating income of $8.4 million in the fourth quarter. That’s within striking distance of the $8.9 million earned by neighboring Mandalay Bay, a much larger and more luxurious property that includes The Hotel, an upscale hotel expansion.

For 2009, Excalibur posted $48 million in operating income. That’s down from $84 million the prior year but was better than Monte Carlo, New York-New York and Luxor, which are more expensive properties with higher-end amenities.

Circus Circus and Excalibur earned vastly different amounts of a key profit indicator called EBITDA — earnings before interest, taxes, depreciation and amortization. By this measure, Excalibur earned $72.1 million against Circus Circus’ $27.1 million. Excalibur’s EBITDA fell 35 percent, which is more within the range suffered by other major casinos in the recession. Circus Circus’ EBITDA, however, fell by 52 percent.

Excalibur benefits from being "the low rent alternative" to Mandalay Bay, MGM Grand, and other nearby higher end MGM Mirage casinos. The same can't be said, however, of Circus Circus, since its next door neighbors are now... Well, nothing. The lot at the corner of Las Vegas Blvd. and Sahara Ave. is empty, and Echelon won't resume construction until 2012 at the earliest.

And obviously, it isn't just MGM Mirage feeling the pain with Circus Circus. Riviera and Sahara have also suffered from this curse of the mothballs, as Fontainebleau looks likely to remain a smoldering hot mess until Carl Icahn decides to finally finish it.

So in the coming weeks, months, and years, it will be interesting to see what happens on The North Strip, what was once "The Original Strip". Many of the casinos up there were once sturdy survivors... But will they be able to survive the rest of "The Great Recession"?

F-bleau: Well Ain't This Interesting, Carl Icahn Takes It After All

OK, back to the important news of the day. Carl Icahn is back, and he wants another Strip casino.

Carl Icahn is expected to take over ownership of the bankrupt Fontainebleau Las Vegas resort after two potential competitors vying to buy the property failed to submit qualifying bids as of a 5 p.m. deadline Friday.

The U.S. Bankruptcy Court in Miami, where Fontainebleau filed for bankruptcy protection last year, is expected to conduct a hearing Jan. 27 to approve the sale of the Las Vegas Strip property to Icahn, who bid $156.2 million for it last year. [...]

Icahn could not be reached for comment. In a court filing, attorneys for Examiner Jeff Truitt said Truitt received two "submissions" for Fontainebleau on the bid deadline. The filing didn't identify the parties that made the submissions.

"However, for various reasons, including that neither of the submissions were accompanied by either the requisite deposit or satisfactory evidence of the financial ability to close a sale transaction, the examiner has determined that the submissions are not qualified bids," the court filing said. "Accordingly, the only qualified bid received by the examiner is the Icahn Nevada Gaming Acquisition LLC bid. Based on the foregoing and in accordance with the bidding procedures, there will be no auction for the assets."

San Francisco real estate investor Luke Brugnara is also trying to bid on F-bleau, but it doesn't look like the court wants him anywhere near this property. Lesson learned, kids... Don't come to a cash game begging for credit.

And what exactly will become of F-bleau once Icahn does take control as now expected? No one knows for sure, except everyone seems to agree this means the finished project most likely won't completely resemble what original developer Jeffrey Soffer had planned for it.



And not that long ago, Liz Benston read the tea leaves and offered a strong possibility for Fontainebleau's future.

With lower and middle classes flocking to Las Vegas during boom years, Stratosphere [Icahn's last big Vegas purchase] was in the right place at the right time.

Perhaps Icahn wants to create a mid-market resort out of Fontainebleau — a strategy that might appeal to bargain-hunting tourists soured on fancy hotels. The property might complement the nine casinos Icahn is acquiring as part of Tropicana Entertainment, which includes the MontBleu resort in Stateline, Tropicana Express in Laughlin and Tropicana resort in Atlantic City. (The Tropicana in Las Vegas, acquired by another buyer out of bankruptcy, wasn’t part of the deal.)

Or perhaps Icahn is bluffing.

In one sense, he has shown his hand. Icahn has gone where other investors have feared to tread — making a fortune on the business missteps of others. [...]

While $156 million sounds like a steal, it might still be too much for others — without Icahn’s knack for timing — to stomach.

This may make sense, as it seems The North Strip (or at least everything north of Wynncore) is destined (or doomed, depending on one's point of view) to remain a lower-end "Vegas experience". There's still a possibility Icahn may not do anything but let it rot a la Echelon for a couple year, but judging by Icahn's past Vegas moves it seems more likely he'll finish F-bleau, but not in the uber-high-end manner that Soffer and his Miami buddies had intended. Instead, he may spend less than the $1.5 billion that Penn National Gaming suggested was needed to finish the project (as Soffer had intended) and open F-bleau (Or is it "New Tropicana"? Or "Stardust Reborn"?) as a more mid-range or bargain casino.

Who knows? Maybe we're all wrong? Or maybe Carl Icahn has a few more tricks up his sleeve that he doesn't yet want to show us?

2010: What's Next

Happy New Year... Or will it be? Oh, I think so.

Over the next few days, I'll be collecting on my thoughts on what may lie ahead in 2010. Now that we're done looking back in 2009, we can now look forward.

In the mean time, here's what I'm looking forward to in 2010:

- Harry Reid surviving yet another Senate reelection campaign, thanks to a major victory on health care and an improving Nevada economy (as well as the total incompetence of the GOP).

- Continued turbulence in the Governor's race... Already declared one of the most interesting in the country, and this was BEFORE Oscar Goodman jumped into it!

- CityCenter continuing to prove itself as more of the complex opens to the public and the entire project defines its own identity.

- What happens next with the Station Casinos bankruptcy, and whether Boyd Gaming will ultimately conquer (most of) Station.

- Whatever will happen to The Cosmopolitan, Fontainebleau, Echelon, and all the other stalled projects on The Strip.

So what are you thinking about 2010 so far? What do you think will happen to the gaming industry and tourism? And will Nevada ever diversify and allow new industries and new ideas in?

Let's see what happens in the year ahead.

Carl Icahn Starts Bidding War for F-bleau

Oh, this may start to get fun...

Investor Carl Icahn today offered $141 million to buy Fontainebleau Las Vegas, outbidding Penn National Gaming.

Penn National has not yet disclosed whether it will offer a higher bid.

Icahn's bid was presented to Fontainebleau's bankruptcy judge today, and a hearing on the issue was under way in the afternoon Miami time.

Penn National last week offered $101.5 million -- $50 million in cash and a loan of $51.5 million.

An attorney for Fontainebleau, Scott Baena, told Bankruptcy Judge A. Jay Cristol today that Icahn initially offered a bid last week exceeding Penn's bid by $25 million. He said Penn National then matched that higher bid.

Icahn then offered another $10 million today, bringing his bid to $136 million, Baena said.

During today's hearing, an attorney for Penn National left and called his client, returning with a bid $500,000 higher than Icahn's and sweetening the deal with other provisions. An attorney for Icahn then countered by boosting Icahn's bid by $5 million to $141 million.

Yep, the legendary Wall Street investor/takeover expert now wants in on the action at F-bleau. At the very least, that should make the bankruptcy proceedings that much more interesting.

And don't be surprised if Icahn actually gets it. Remember that just last year he sold his interest in The Stratosphere, Arizona Charlie's (both locations), and The Aquarius in Laughlin. He's no stranger to casino gaming, so it will be fascinating to watch him open F-bleau should his bid succeed.

I guess if anyone can turn a profit on The Fontainebleau, Carl Icahn can. Let's see if Penn National steps up its game and offers more to finish what's fast becoming the most ridiculous boondoggle ever seen on the Las Vegas Strip.

Penn National DOES Want F-bleau, After All

I guess this is good news?

Penn National Gaming Inc. on Monday made a $50 million "stalking horse" bid to buy the stalled Fontainebleau casino-resort in Las Vegas, with plans to spend another $1.46 billion to complete the project.

Penn's offer, filed in Miami's bankruptcy court, sets in place an auction process in which other investors will have an opportunity to bid for the property.

Fontainebleau also said in a court motion Monday that Penn National and unnamed lenders have agreed to provide $51.5 million in debtor-in-possession financing to cover its costs since filing for bankruptcy and to keep the company afloat during the sales process.

Court papers indicated Penn National has committed $50 million to buy the project, less unspecified "remediation costs" and costs to cure defaults on leases and contracts it would inherit.

The Penn affiliate offering to buy the project is Nevada Gaming Ventures Inc. Penn for some time has been looking at opportunities to enter the Las Vegas gambling market, the nation's largest.

Now $50 million seems like small change for such a massive Strip resort... But let's remember just how all of this got started. This place has been one hot mess for quite a while, and Penn will still need to settle at least $350 million in debt and spend another $1.46 billion just to finish this resort.

But attorneys for Fontainebleau said they're hopeful Monday's bid is not the only offer for the project, which was developed by affiliates of Miami-based Turnberry Associates. Turnberry is known in Las Vegas for developing high-rise luxury condominiums and the Town Square Shopping Center.

"The debtors are both hopeful and optimistic that finalizing the purchase agreement marks the beginning of a competitive sale process that will drive substantial incremental value to the debtors' estates and their creditors over and above the purchase price offered by Nevada Gaming Ventures," Fontainebleau attorneys said in Monday's court filing.

Once valued at $2.9 billion, $1.675 billion has been borrowed against the 3,815-room Fontainebleau, where construction shut down this summer after Bank of America and other big banks canceled a loan agreement because of cost overruns and other problems.

This may be the end of the line for Turnberry's Las Vegas operations. At the very least, I'm not expecting any more Turnberry projects on or near The Strip any time soon.

But hopefully, this will be a much needed turn of the page for F-bleau. It needs to be finished ASAP to start making money. And if Penn succeeds in gobbling it up in bankruptcy court, then Penn will be getting it in a real steal of a deal! I hope they'll finish F-bleau soon enough so that it won't be just another North Strip "abandoned construction" eyesore. Hopefully by late 2010 and early 2011, the economy will have recovered enough to absorb the new rooms online.

What's Next for The Fontainebleau?

Cheese louise! This hotel isn't even open yet, but the drama's been checked in for quite some time. First there were construction problems, then the law suits started flying, then the current owners filed for bankruptcy... And now, the whole project is up in the air despite it already being 70% completed!

And now, they have to deal with this:

With the Las Vegas Fontainebleau resort bankruptcy case seemingly stalled, a group of contractors is seeking permission to pursue construction lien claims in state court in Nevada -- outside of the bankruptcy process.

The contractors, in a court filing Friday, said they want to get started protecting their lien claims in state court in part because those claims are under attack by lenders in the bankruptcy court.

The lenders' efforts to subordinate the contractors' liens is based on the questionable assumption that Fontainebleau will find funding to resume construction on the stalled $2.9 billion resort, the contractors argued.

"While the lienholders remain hopeful the debtor will find additional funds (either through an equity infusion and/or junior debt facility) to complete the project, we are 90 days into this reorganization proceeding and reality has begun to set in. After three months, debtors have identified no exit strategy nor source of additional outside capital. With no financing, no equity infusion, and no plan, it has become clear (the lienholders) are forced to take action to protect their interests."

Meanwhile, rumors have surfaced that companies like Penn National Gaming may try to gobble up The Fontainebleau in bankruptcy. And hey, why not? Oh yeah, everything that we already talked about!

Still, this Strip property may be enough of a hidden gem for these suitors to seriously consider cleaning up the hot mess to take this once-in-a-lifetime opportunity to own a Strip casino for so cheap. Heh, if only we had the money to buy this "bargain"... ;-)