Moodys Investors: Twin River could sustain major blow
11:24 AM EDT on Tuesday, August 30, 2011
PROVIDENCE, RI ? In a special report late last week on the high likelihood of casino gambling and slots finally coming to Massachusetts, Moodys Investors Service said: Twin River could sustain a major blow.
In a report titled The Bay State Ups The Ante, the national credit-rating agency called it highly likely that Massachusetts lawmakers will pass casino legislation this year, but said more casinos will not necessarily attract more gambling dollars to the region.
The possibility of a reduction of consumer spending on gaming remains a significant longer-term threat, the report said.
Unlike the pre-Great Recession years, we do not believe further expansion of gambling will necessarily be accompanied by a material increase in consumer spending on gaming. This could increase pressure on existing operators in the Northeast as well as the US gaming sector as a whole, it said.
Moodys predicted the two Connecticut casinos ? Foxwoods and Mohegan Sun ? would face the biggest risk, since they both draw a substantial number of their customers from Massachusetts.
We believe the addition of casino-style gaming to Massachusetts would have a profound, long-term effect on Foxwoods (not rated), which is owned by the Mashantucket (Western) Pequot Tribal Nation, and Mohegan Sun, which is owned by the Mohegan Tribal Gaming Authority, the report said.
But Moodys also predicted a major blow to Twin River, the former greyhound racetrack in Lincoln that is home to more than 4,750 electronic-gambling machines placed there by the state Lottery under terms where the state keeps roughly 61 cents out of every dollar a gambler leaves behind.
The state expects $275,531,880 from the video-slot play at Twin River this year alone, and another $28,722,300 from the smaller of the states two slot parlors, Newport Grand.
Twin River also draws a significant number of its own customers from Massachusetts ? close to 40 percent, by one estimate.
In its report, Moodys said: Heightened competition in Massachusetts will likely have a material, negative impact on the earnings and cash flow of the Rhode Island casino owned by Twin River Management Group Inc.
However, we expect it will take time for Massachusetts to authorize, license and open its casinos. This could give Twin River an opportunity to further pay down debt and absorb the hit.
Rhode Island lawmakers have already approved a referendum in November 2012 on allowing Twin River to offer blackjack, roulette and other traditional casino fare currently banned in Rhode Island, where only the electronic games, known locally as video-lottery terminals, are currently allowed.
The measure, approved as part of the 2012 state budget, does not say how much, if anything, the big banks and other financial institutions that acquired Twin River out of bankruptcy late last year would have to pay for Rhode Islands first and potentially only full-fledged casino license, and how much of the new table-game revenue the state would keep. But the legislation anticipates further conversations between state lawmakers and the slot parlors owners during the 2012 legislative session.
Twin River spokeswoman Patti Doyle said: The recent Moodys report is further recognition that the passage of full casino gaming in Massachusetts is imminent, and its impact on Twin River could be significant, particularly if we are forced to compete with our neighbors to the north and the south without table games.
We have consistently said that we must have the ability to level the playing field with respect to gaming and entertainment opportunities for our customers, and the addition of table games will allow us, in the long term, to compete effectively.
The governor and top lawmakers in Massachusetts have proposed a bill to allow the opening of three Las Vegas-style casinos and one slot parlor in an effort to create jobs and close a $1.8-billion budget gap. If the measure passes, we think as many as 10,000 slot machines could be added to the Northeastern US market, Moodys said.
kgregg@projo.com / 277-7078
Source: http://www.thefirstteeseacoast.org/2011/09/moodys-investors-twin-river-could-sustain-major-blow/
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