Newspaper article St Louis Post-Dispatch (MO)

Gambling Stocks Hit by Defeat at Polls

Newspaper article St Louis Post-Dispatch (MO)

Gambling Stocks Hit by Defeat at Polls

Article excerpt

Wall Street showed no mercy Wednesday on gambling stocks. After Tuesday's narrow defeat of an amendment to legalize most casino games in Missouri, nearly every stock in the industry lost value.

The companies whose projected earnings are most closely tied to Missouri ventures received the worst punishment from investors. In addition, some of these firms could soon face a severe cash crunch when debt financing becomes difficult or impossible.

Hardest hit Wednesday was President Riverboat Casinos Inc., which plummeted 30 percent, closing at $12.50 a share. President's future is heavily dependent on the immobile Admiral, which it still hopes will be its flagship.

Two other firms that plan casinos in the St. Louis area also suffered dramatically. Station Casinos Inc., owner of the Casino St. Charles, lost 20 percent, closing at $14.75. Argosy Gaming Co., owner of the Alton Belle, dropped 18 percent to $19.75.

The one-day drop in stock-market value for five of the companies planning major casinos in Missouri - Hilton Hotels and Promus Cos. in addition to President, Station and Argosy - totaled $868 million. That comes to $688,000 per vote for the 1,261-vote margin that defeated the amendment.

Stock prices may well recover, especially if the bottom fishers that are anticipated by analysts make their appearance. But the shock of Missouri's reversal of legalized gambling could dry up other sources of financing for riverboat casino companies that depend on rapid expansion.

"Investors, both on the equity and debt sides, are going to be scared by the Missouri vote," said Stephen Schneider, a gaming analyst at Stifel, Nicolaus & Co.

The industry had already suffered in recent weeks, largely because of the drop in the entire stock market and concern over a potential federal excise tax on casino winnings. Tougher market conditions caused Station to withdraw an $80 million debt offering last week.

Argosy has a $193 million debt offering pending. Experts expect that to be withdrawn because of Tuesday's vote. With expansion efforts in several states, Argosy is running low on cash.

President faces the possibility of having to refund up to $50 million in money that it already raised. The company issued $100 million in bonds in Janaury that replaced older bonds. It promised bond buyers that if the Admiral did not open its planned casino by Sept. 23, President would buy back enough bonds to reduce the debt to $50 million.

Only a successful election in August - if one is even held - followed by very rapid licensing, or a deal with the institutions that hold the bonds can save President from having to refund the money.

Of the three casino firms hardest hit in Wednesday's stock market, Station may be in the strongest condition, analysts said. Chief financial officer Glenn Christenson said Station can service its current debt plus fund the $80 million from existing operations. …

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