Ohio casino gets gaming license despite debt issue
February 13, 2013
The Herald-Dispatch / 2013
Herald-Dispatch.com
CINCINNATI (AP) — The Ohio Casino Control Commission on Wednesday issued a gambling license to Ohio’s fourth and final voter-approved casino despite the $20 billion in debt of one of its developers.
The commission decided to issue the license to Horseshoe Casino Cincinnati, set to open March 4, at its meeting in Columbus after discussing concerns about the $20 billion in debt of one of its developers, Caesars Entertainment Corporation.
“The interest payments on that debt consume virtually 100 percent of the company’s current cash flow,” according to an investigative report conducted for the commission by Linwood, N.J.-based Spectrum Gaming Group.
The report, which was presented at the meeting, called Caesars’ debt “extraordinarily high” but said the company was meeting all of its debt obligations.
“However, should the economy fail to recover sufficiently or if another downtown occurs, it could cause a present difficulty for Caesars to meet its debt service and covenant requirements,” the report said.
Caesars spokesman Gary Thompson said from Las Vegas that the company “acknowledges we have a high debt load” but that it has more than $2 billion in liquidity and has expanded the vast majority of its debt to 2017 and beyond.
“We had a higher debt load in 2008 when the economy crashed,” Thompson said. “We had a lot of predictions that we might not be able to meet our liabilities, and we have persevered and met every one. Never been late, never missed a payment.
“I think we’ve demonstrated our ability to overcome some very severe economic challenges,” he added.
The commission agreed to issue Horseshoe Casino Cincinnati’s license on the condition that Caesars undergo an annual review of its financial stability and provide updates to the commission if there are any major changes to the company’s debt, good or bad.
“We would be looking to see what the risk was for the state of Ohio if they should get into serious financial trouble,” said the commission’s executive director, Matt Schuler. “We are monitoring this on a daily basis.”
Schuler said the risk is minimized by the fact that Caesars has about a 20 percent investment in the venture, while Detroit-based Rock Gaming LLC has the rest.
The financial status of Rock Gaming, led by Dan Gilbert, owner of the NBA’s Cleveland Cavaliers, was not mentioned in the investigative report, but company spokeswoman Jennifer Kulczycki said that its equity contribution already has been made.
Rock Gaming and Caesars also developed Cleveland’s casino together. That casino’s license also requires Caesars to undergo a yearly review of its financial stability.
The scheduled March 4 opening of Cincinnati’s casino is contingent on a dry run of the facility set for Feb. 27.
The invite-only event is for family, friends and business partners of the casino’s staff, and is closed to members of the media and general public. All proceeds will be given to charity.
The casino will have to fix any problems identified during the dry run before being allowed to open. If any major problems are identified, the opening could be delayed.
Cincinnati’s casino will be the last of four voter-approved casinos to open in the state all in less than 12 months if everything goes as planned. Casinos Cleveland, Toledo and Columbus opened starting in May; voters approved of them in 2009.
The state collects 33 percent in gross revenue taxes from the casinos, money that goes to the state’s counties, school districts, the four casino cities, the casino commission and programs for problem gamblers.
Horseshoe Casino Cincinnati projects that it will generate $100 million in gambling tax revenue every year.
The commission decided to issue the license to Horseshoe Casino Cincinnati, set to open March 4, at its meeting in Columbus after discussing concerns about the $20 billion in debt of one of its developers, Caesars Entertainment Corporation.
“The interest payments on that debt consume virtually 100 percent of the company’s current cash flow,” according to an investigative report conducted for the commission by Linwood, N.J.-based Spectrum Gaming Group.
The report, which was presented at the meeting, called Caesars’ debt “extraordinarily high” but said the company was meeting all of its debt obligations.
“However, should the economy fail to recover sufficiently or if another downtown occurs, it could cause a present difficulty for Caesars to meet its debt service and covenant requirements,” the report said.
Caesars spokesman Gary Thompson said from Las Vegas that the company “acknowledges we have a high debt load” but that it has more than $2 billion in liquidity and has expanded the vast majority of its debt to 2017 and beyond.
“We had a higher debt load in 2008 when the economy crashed,” Thompson said. “We had a lot of predictions that we might not be able to meet our liabilities, and we have persevered and met every one. Never been late, never missed a payment.
“I think we’ve demonstrated our ability to overcome some very severe economic challenges,” he added.
The commission agreed to issue Horseshoe Casino Cincinnati’s license on the condition that Caesars undergo an annual review of its financial stability and provide updates to the commission if there are any major changes to the company’s debt, good or bad.
“We would be looking to see what the risk was for the state of Ohio if they should get into serious financial trouble,” said the commission’s executive director, Matt Schuler. “We are monitoring this on a daily basis.”
Schuler said the risk is minimized by the fact that Caesars has about a 20 percent investment in the venture, while Detroit-based Rock Gaming LLC has the rest.
The financial status of Rock Gaming, led by Dan Gilbert, owner of the NBA’s Cleveland Cavaliers, was not mentioned in the investigative report, but company spokeswoman Jennifer Kulczycki said that its equity contribution already has been made.
Rock Gaming and Caesars also developed Cleveland’s casino together. That casino’s license also requires Caesars to undergo a yearly review of its financial stability.
The scheduled March 4 opening of Cincinnati’s casino is contingent on a dry run of the facility set for Feb. 27.
The invite-only event is for family, friends and business partners of the casino’s staff, and is closed to members of the media and general public. All proceeds will be given to charity.
The casino will have to fix any problems identified during the dry run before being allowed to open. If any major problems are identified, the opening could be delayed.
Cincinnati’s casino will be the last of four voter-approved casinos to open in the state all in less than 12 months if everything goes as planned. Casinos Cleveland, Toledo and Columbus opened starting in May; voters approved of them in 2009.
The state collects 33 percent in gross revenue taxes from the casinos, money that goes to the state’s counties, school districts, the four casino cities, the casino commission and programs for problem gamblers.
Horseshoe Casino Cincinnati projects that it will generate $100 million in gambling tax revenue every year.
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