Analyst Believes Casino Operators Will Weather Economic Storm
In the past year casino operators have watched their stock prices dip to levels they never envisioned. While many people believe these companies could be in trouble economically, one analyst says casinos will weather the storm just fine.
"I think equity will change hands. The composition of the industry will be different," said Bill Lerner, an analyst from Deutsche Bank, "I think companies will be extremely conservative with balance sheets. The focus will be less about expansion, more about consolidation."
The opinion comes on the heels of MGM Mirage announcing that they may default on debt that it has. They are currently working on finishing the most expensive casino project ever, the CityCenter in Las Vegas. The total cost for the project is $8.6 billion.
Lerner believes it is that project that may end up being the savior for MGM. They will have the option to sell off one of the hotel towers to a hotelier and make up some of the money that they owe.
Other companies are in similar positions to MGM. The Las Vegas Sands Corp. has spent the past six months trying to keep themselves above water. Sheldon Adelson is confident that his company will come through the storm with increased revenue from Macau.
One company that has already hit bankruptcy is Trump Entertainment Resorts. Another, Station Casinos, is on the verge of bankruptcy, but may sell their casinos before they have to go that route.
Lerner believes that the companies have enough properties that if they have to sell a couple off to remain financially secure, then they will do that. He also believes that the liquidity these companies possess can get them through this tough time.
March 4, 2009
Posted By Tom Jones
Staff Editor, CasinoGamblingWeb.com
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