Making the News

Fresno Bee

Originally Published:Saturday, November 29, 2008

"Obviously this is a bad time to be trying to build a casino anywhere," said Joseph Weinert, an analyst with the New Jersey research firm Spectrum Gaming Group.

Valley casino future unsure
Vegas company faces financial struggles.

By Chris Collins
Fresno Bee


The Las Vegas company that wants to build a $250 million casino off Highway 99 near Madera is struggling financially and may have trouble lining up money to fund the project, gaming industry analysts say.

Even worse, Station Casinos could file for bankruptcy, which would force the Mono Indians of the North Fork Rancheria to search for a new financial partner and delay the project indefinitely.

"Obviously this is a bad time to be trying to build a casino anywhere," said Joseph Weinert, an analyst with the New Jersey research firm Spectrum Gaming Group.

Despite the nation's faltering economy which has not spared even the resilient gaming industry tribal officials say the project could break ground as early as 2010. They say the Madera casino will generate thousands of jobs and inject tens of millions of dollars into local business and government coffers.

But the project, which would be California's first off-reservation casino, still needs approval from federal officials and state legislators.

Station Casinos' financial troubles are emerging as an additional hurdle.

Since the beginning of the year, the company has delayed plans to build a new casino in Las Vegas and, according to filings with the Securities and Exchange Commission, has lost more than $75 million. Analysts say the company is struggling to make payments on its debt, which totaled $5.4 billion as of September.

The setbacks reflect a general downturn in the gaming industry. Station Casinos, the largest operator of suburban casinos in Las Vegas, has been hit especially hard because of the high rate of home foreclosures in Las Vegas, gaming consultant Ken Adams said.

Credit rating agencies have increasingly warned that Station Casinos will likely be unable to make its scheduled debt payments. If that happens, analysts say, the company could file for bankruptcy.

Station Casinos, however, says it expects to make its debt payments on time and complete the Madera project.

"We're confident that when the time comes to finance the project, we'll be able to do so," company spokeswoman Lori Nelson said.

Tribal Chairwoman Elaine Bethel-Fink said there is nothing in the tribe's contract that dictates what would happen if Station Casinos went bankrupt. She said she's not sure how that would affect the partnership or what the tribe would do if that happened.

"This economy was not anticipated," she said.

If the company does make it through the economic downturn, it still faces other financial challenges that could delay the Madera project.

The credit crunch has made it difficult for companies to find money for large projects, analysts say. If the problem persists, it may be years before Station Casinos could borrow money to build the casino.

"No one is getting financing not Harrah's, not MGM, not Station," said Las Vegas gaming consultant Adams, referring to some of the biggest casino companies in the country.

Harrah's Entertainment announced this month that it will back out of a $560 million casino project near Wichita, Kan., because it could not find the money to build it. Similarly, Station Casinos said this month that it will delay construction on a Las Vegas casino indefinitely.

"Station and Harrah's are in very similar situations," said Bill Eadington, an economics professor and the director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada in Reno.

He said that creditors are reluctant to lend either company the money necessary to build projects because they are struggling to make their current debt payments. Any money borrowed would come with higher interest rates. 


Standard & Poor's credit-rating service downgraded Station Casinos' rating this month to CCC, which S&P analyst Ben Bubeck described as a "very low rating." He said Station Casinos is "not at all" in a position to expand.

There is some hope for the Madera project. Bubeck believes that the casino industry will suffer more losses at least through early 2009, but has strong long-term prospects.

Since it could be two years before the Madera casino breaks ground, there is a good chance Station Casinos will be able to fund the project by then, assuming it survives the nation's economic storm, Eadington said.

"If markets go back to anywhere near normal, it could be very viable," he said. "But given Station's current situation, it certainly will be very quiet in the short term."

Richard Wells, a former Harrah's Entertainment executive and the president of Wells Gaming Research, a consulting firm in Reno, said the Madera casino is an attractive project because the proposed site is next to Highway 99 and would be highly visible. That will make it easier for Station Casinos to borrow money when the time comes to build the casino.

Nonetheless, Station Casinos still has to find money to keep the project afloat for now $5 million to $10 million a year in attorney and engineering fees, Eadington estimated.

The casino would be built four miles north of Madera on a 305-acre plot of land. It would have about 2,500 slot machines, 70 table games, multiple restaurants and a hotel.

Gov. Arnold Schwarzenegger signed a compact with the Mono Indians in April that would give the state about $25 million a year from gaming profits if the casino is built. The compact still needs to be approved by the state Legislature.

Many of the more than 1,700 members of the Mono Indians tribe believe the casino would help fund essential health-care and education programs to a community that struggles with unemployment and access to basic housing. But because the casino would be built about 35 miles from the North Fork Rancheria, the project needs approval from the U.S. Department of the Interior, which oversees the Bureau of Indian Affairs.

Only three tribes have had off-reservation casinos approved in the past 20 years. 



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