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Expert Says Casino Operators Will Outlast Recession
LAS VEGAS, NEVADA --
Although stock prices have shrunk to pennies on the dollar from a year ago, at least one prominent gaming industry analyst thinks the big land casino companies will be able to avoid bankruptcy. Bill Lerner of Deutsche Bank says some operators may have to sell off equity, but debts probably won't ruin big destination resort casino companies.
MGM Mirage made news the past week by emptying its revolving credit account, a move which put the company at maximum borrowing point and was widely speculated to be a sign of reorganization to come.
Las Vegas Sands also has credit covenants in danger, as debt-to-income ratios change with the tumbling economy. Many casino firms have been caught overextended as the oneupsmanship to build the biggest and plushest gambling resort became a Las Vegas Strip passion.
Still, Lerner notes that MGM Mirage was able to find $775 million by dealing the Treasure Island casino to Phil Ruffin. Lerner feels the company can use its ten Strip properties and other holdings to fight off creditors. "I don't think any property is out of the question. They've got an arsenal of weapons that they can launch to address liquidity and to some extent leverage."
Sands and other resort owners also have options, says Lerner. Properties such as retail space along the Cotai Strip could be sold, or negotiations with banks can set new terms.
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