MTR Credit Rating Drops
By CASEY JUNKINSCHESTER - MTR Gaming Group Inc., the parent company of Mountaineer Casino Racetrack and Resort, must increase earnings by 60 percent to avoid violating the financial covenants of its credit agreement, Standard and Poor's Rating Services announced Friday.
Standard and Poor's also lowered MTR's corporate credit rating from a "B+" to a "B-," which recognizes Standard and Poor's lack of confidence in MTR.
"The ratings downgrade reflects our concern that the company will violate the financial covenants established in its credit agreement in the near term, despite having previously amended its covenants in March 2008," said Standard and Poor's credit analyst Mike Listner.
Listner said MTR's earnings before interest, taxes, depreciation and amortization needs to grow about 60 percent on a year-over-year basis.
"They (MTR) must either reduce debt or increase profitability. If they do not, they will be in violation of the financial covenants of their credit agreement," he said.
Listner was uncertain which banks had agreements with MTR, but said it was likely "several."
He was also unsure of what the consequences would be for MTR in the event the company would violate its credit agreement.
As for the letter grades, Listner said they could be thought of as credit scores for individuals. "If you have a lower grade or score, you will have higher interest rates," he said.
In addition to the Chester track, MTR also owns Presque Isle Downs in Erie, Pa.; Scioto Downs in Columbus, Ohio; 90 percent of Jackson Harness Raceway in Jackson, Mich.; and 50 percent of Running Aces Harness Park in Columbus, Minn.
According to the West Virginia Lottery Commission, Mountaineer's highest-earning year in terms of slot machine revenue was Fiscal 2004, when the track earned $259.2 million. The track earned $254.8 million in Fiscal 2005, $252.3 million in Fiscal 2006, $248.6 million in Fiscal 2007 and $215.5 million in Fiscal 2008.
In anticipating a loss of slot machine revenue when Pennsylvania plugged in its machines, officials with Mountaineer and Wheeling Island Hotel-Casino-Racetrack last year convinced the West Virginia Legislature to allow table gambling at the tracks, following passage of a local referendum on the issue.
Between the start of table games on Dec. 20 and July 19, Mountaineer earned about $157.7 million in both slots and table games, about $13 million more than the same time period one year earlier when the track had only slot machines.
But counting only slot machine revenue from Dec. 20 to July 19, Mountaineer took in $129.8 million. This is about 9 percent less than the $144.6 million the track gained over the same period a year earlier.
As for table gambling, Mountaineer claimed nearly $27.9 million over the period.
Listner said table gambling at Mountaineer will probably not allow the track to overcome a slowing economy and revenue losses to the Meadows Racetrack and Casino in Meadowlands, Pa. This means MTR will be relying on the growth of Presque Isle Downs to avoid the covenant violation.
According to the Pennsylvania Gaming Control Board, Presque Isle Downs has earned $240.3 million in slot machine revenue since the casino opened in February 2007.
In observing West Virginia's success with table gambling, Pennsylvania legislators are now sharing their views on House Bill 2121, which would permit table gambling at Pennsylvania's slot machine facilities, such as Presque Isle Downs and The Meadows.
In addition to Presque Isle Downs and The Meadows, other Keystone State casinos that may eventually offer table gambling include Mohegan Sun at Pocono Downs in Wilkes-Barre; Philadelphia Park in Bensalem; Harrah's Chester Downs in Chester, Pa.; Mount Airy Casino Resort in Mount Pocono; and Hollywood Casino at Penn Nation Race Course in Grantville.
There's also the Majestic Star Casino proposed to open on Pittsburgh's North Shore in 2009. Even without table gambling, the Pittsburgh venue likely will hurt Mountaineer's revenue even further.
Despite Standard and Poor's analysis, MTR spokeswoman Tamara Pettit is optimistic about the future of MTR and Mountaineer.
"We understand the tightness of the credit market, but we believe our prospects are good," she said.
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EllisWyatt
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08-16-08 11:37 PM
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Las Vegas is a gambling mecca, but most of the city is in ruins. You don't see it in the brochures but Las Vegas schools are horrible and they can't find anyone to teach there. The crime rate is out of control. There is quite a bit of poverty. Reno is a crime infested city where danger lurks just beneath the surface. Atlantic City is a ghetto town and there are housing projects two blocks from the Taj. How has gambling really helped these cities with important factors? Crime rates, education, quality of life? Many companies do not want to locate near gambling due to the obvious problems associated with this addiction. If the state is going to waste millions of our tax dollars, why not put it into attracting businesses? Gambling revenues will not save this state. Good paying jobs from successful companies can. How many Fortune 500 companies are in West Virginia? ZERO. Why not encourage a large company to move HQ to Wheeling? This could attract others, as well.
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deanminer
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08-16-08 5:02 PM
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I noticed on the "jackpot" wall of winners today that out of the 50 winners or so, only one was from WV. Does this show that the casinos are attracting out of state tourism?
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atoddh
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08-16-08 2:18 PM
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Ellis: Gaming is an important component of WV tourism.Guests at the tracks are mostly out of state and they spend a great deal on food and lodging. Gaming is a form of entertainment.Actually entertainment is a part of the draw. The tracks and casinos need to be enlarged and made even more elaborate and sophisticated regional draws.This includes improvement in the quality of the dogs and horses. WV needs tourism income. P.S.Practical job training of all sorts is the mission of the Community Colleges.The students took the course and have jobs; as it should be.
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deanminer
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08-16-08 11:02 AM
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Last week, I asked a few dealers if it was a good job and they all responded with an enthusiastic yes. Do you have any solutions, should we just abolish gaming, which of course would include all the non-destination gaming taking place?
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EllisWyatt
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08-16-08 9:59 AM
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Gambling, which is a narcotic for West Virginia that has done nothing to facilitate economic development but HAS resulted in many poor West Virginians losing their money, is now asking for handouts? We should subsidize this sleazy business? Remember the Island firing 300 people when table gaming didn't pass and then making people pay to take classes at Northern and claiming that they "created" 300 new jobs with table gaming? Remember "Vote Yes For Jobs" (jobs they had previously cut)? Remember "dealers will earn $35,000 per year plus benefits"? I think the dealers earn lousy benefits and are paid like waitresses. Oh, the Island said later, they will make $35,000 WITH tips. Tired of the lies.....
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atoddh
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08-16-08 3:38 AM
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The Wheeling Press is opposed to incentives for Mountaineer and Wheeling Downs to attract more patrons. Moreover,Reporter Junkins has published misleading recent articles about the huge "bottom lines" at the casinos.The truth is: WV gaming is in trouble and every effort needs to be made to help them.PA is eating our lunch.
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