New Hampshire: Cannery Casino: High Default Risk

From our Friends to the North report another insolvent partner --

The Las Vegas Sun reported Thursday that Moody's Investors Service has downgraded the debt of Cannery Casino Resorts, prospective developer of the Salem racetrack slots barn. Moody's now rates Cannery at Caa1, meaning "subject to very high default risk."

"Moody's said the downgrade reflects the slower than expected ramp up at Cannery's two new casinos: the Meadows near Pittsburgh, which opened in April; and Eastside Cannery on Boulder Highway in Las Vegas, which opened in August 2008," reports the Sun.

'The East Side Cannery and two other Las Vegas casinos are ... performing well below original expectations and will continue to struggle in the foreseeable future," wrote Moody's.

Kevin Landrigan reported on the downgrade in his Sunday Nashua Telegraph column with the ominous headline, "Expanded gambling not always sure thing."


Backers of the Sagamore Crossing casino proposed for Hudson have refused to identify their funding sources. Perhaps they have no funding?


Predatory gambling backers are operating under the now-indefensible assumption that lenders will plow money into New Hampshire's second-string (not near major metro markets) gambling locations and that the already debt-strapped consumer will go deeper into debt to fund more gambling losses.

Or ... are the Salem and Hudson slots casino proposals really intended as flips? Use a bunch of familiar faces to trick the legislature into granting these as monopoly locations, then sell the permits. Will New Hampshire like being in bed with the as-yet unknown buyers?


Report: Fall in gaming revenue slows, too early to call bottom

High unemployment nationwide continues to hinder the gaming industry's recovery from the recession, analysts at Moody's Investors Service say.

While recent statistics suggest the drop in U.S. gaming revenue caused by the recession continues to ease, it's still too early to say gaming revenue has hit bottom, Moody's said in a report Friday.

"On a weighted average basis, the percentage change in gaming revenues decelerated materially across the major U.S. markets in September," Moody's Vice President and Senior Credit Officer Peggy Holloway said in the report. "However, October results so far are less encouraging considering easy comparisons to October 2008."

Moody's said October gaming figures are important because it was the first full month with a comparison to the sharp drop in U.S. consumer spending prompted by the failure of several Wall Street financial institutions in September 2008.

Moody's said it expected more deceleration of negative trends in October, though it's analysis doesn't include Nevada's October numbers since they have not been released yet.

Nevada casinos won $911 million in September, down 8.99 percent from September 2008. For the July-September period, Nevada gaming win was down 10.28 percent.

Moody's noted Las Vegas Strip results in September indicated a significant deceleration of negative trends and that with visitor volume to the city increasing 4.3 percent in September, "The September results may be a harbinger that a bottom is near for the Las Vegas Strip."

Around the country in October, Illinois, Iowa and Michigan showed continued deceleration of negative trends -- though Moody's found the results in Iowa and Illinois were not as robust as suggested by the numbers on a same-store basis.

Louisiana's positive year-to-year increase likely reflected in part the 2008 hurricanes that disrupted casino operations there, Moody's said.

New Jersey reported a second month of single-digit declines after seven consecutive months of double-digit drops, as Indiana and Missouri reported consecutive monthly gains in gaming revenue.

"It appears that state gaming revenues are headed towards a bottom and so stabilization in the gaming industry may be near. However, true stabilization in gaming revenues will require a few more consecutive months of moderating declines. Although U.S. GDP has started to grow, unemployment remains stubbornly high (10.2 percent nationwide) and we believe this will keep pressure on gaming budgets and the nascent recovery in gaming revenues that appears to be emerging," Moody's report said.

"When we believe that gaming revenues will not materially erode during the next 12-18 months, we will be more confident in calling the bottom. The moderation of monthly gaming revenue declines across many states through the remainder of 2009 is needed before we are comfortable saying industry conditions have stabilized," Moody's said.

Even as conditions improve in Las Vegas and around the country, analysts remain concerned that gaming companies exposed to the Las Vegas Strip and the Las Vegas locals market will be challenged by increased supply and the slow economy in Las Vegas.

Las Vegas Strip leader MGM Mirage predicts visitation to Las Vegas next year will grow 7 percent to 38.1 million people, outpacing the projected capacity increase of 5 percent.

But analysts at CreditSights said in a report last week: "We agree that the overall Las Vegas market is likely to improve next year, but we are more cautious on the ability of operators to grow demand faster than capacity."

Even before CityCenter opens next month, MGM Mirage and competitors have had to lower room rates.

This in part was how MGM Mirage maintained its 95 percent occupancy rate on the Las Vegas Strip in the third quarter.

MGM Mirage said that for the third quarter, daily revenue per available room on the Strip fell from $129 in the 2008 quarter to $100 in the 2009 quarter.

And even as visitation to Las Vegas fell 4.7 percent this year through September, the city's room count grew 2.5 percent from a year ago to 141,190.

That number is projected to grow to 149,156 by the end of the year and to 153,149 by the end of 2010.

Recent and planned expansions and openings included in the numbers involve CityCenter, with 4,004 rooms at its Aria hotel-casino alone; along with Planet Hollywood Towers by Westgate, the Cosmopolitan, the Hard Rock and the Golden Nugget.

And in part reflecting the Las Vegas economy with its 13.9 percent unemployment rate, Moody's on Thursday downgraded Cannery Casino Resorts LLC's "corporate family" and "probability of default" debt ratings to Caa1 from B2.

This change moves the Cannery debt from "speculative" and "subject to high default risk" to "of poor standing" and "subject to very high default risk."

Moody's assigned a negative outlook to the debt in "anticipation of continued weak operating performance and near-term loan covenant compliance concerns."

Moody's said the downgrade reflects the slower than expected ramp up at Cannery's two new casinos: the Meadows near Pittsburgh, which opened in April; and Eastside Cannery on Boulder Highway in Las Vegas, which opened in August 2008.

"The East Side Cannery and two other Las Vegas casinos are ... performing well below original expectations and will continue to struggle in the foreseeable future along with the entire Las Vegas locals market," Moody's said.

Cannery Casino Resorts also owns the Cannery hotel-casino in North Las Vegas and runs the casino at the JW Marriott resort in Summerlin.

Moody's said its primary concern with Cannery is that the Las Vegas company will need to seek loan covenant relief, which could significantly boost its interest costs at a time when operating conditions remain challenged.