Casino companies are cashing in on lender and investor appetite. Station Casinos is one of the latest gaming companies to tap the loan market, doubling its revolver to $1 billion to develop projects in Las Vegas.Isle Of Capri Casinos is increasing its credit line to fund expansions in Iowa and Florida and MGM Mirage recently completed a mammoth $7 billion bank line for its acquisition of Mandalay Resort Group. "Gaming across the country is viewed as a strong and growing industry," noted Bill Newby, managing director in Bank of America's gaming industries group, which led the Station line. "It's a very simple business model; it's easily understood and easily explained to the credit and investment communities."
Glenn Christenson, executive v.p. and cfo of Station Casinos, said the company did not have a problem getting the bigger credit. "With our development programs and the size of our company we felt it was very appropriate to get the additional capital," he said. "And our banks were thrilled to do it--we were well oversubscribed." The revolver, which matures in December 2009, has pricing of LIBOR plus 1 3/8%.
Station Casinos' current $550 million project, Red Rock Station, will open in the first quarter next year. But the casino operator has a pipeline that stretches out over the next 10-15 years. "The town has done extremely well, gaming continues strong growth," Newby said. "What's good for the strip is certainly going to be good for the local casinos." Station currently manages an Indian casino in Lincoln, Calif., and has a number of other Indian contracts in various stages of evolution. "You take a company like Station Casinos, which is clearly the leader in its niche, which is local casinos, and add that to Indian gaming, it's a very powerful growth story," Newby noted.
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| Glenn Christenson |
Station is not the only casino company benefiting from a borrower's market. "The bank market is stronger than it has been in 20 years and MGM and Mandalay paper has never been stronger," stated Jim Murren, president, cfo and treasurer of MGM, at the time of the acquisition (LMW, 10/1). He explained that bank debt is always the preferred route for casino companies. "We spend significant amounts of capital to build these resorts and we like to access this money as we need it rather than having negative carry." Green Valley Ranch, a casino 50% owned by Station, refinanced its $250 million credit facility with B of A and Wells Fargo Bank in order to complete a $110 million expansion at the property. The Green Valley credit comprises a $50 million revolver and $200 million "B" loan. The revolver is priced at LIBOR plus 1 5/8% and the term loan at LIBOR plus 2%.
"We have a longstanding relationship with [B of A]," Christenson said. "They've led a number of bank deals for us over the last 14 or 15 years. We also have a long-term relationship with Wells," Christenson added. "When I think of our go-to banks, in addition to those guys, I would include Deutsche Bank, Bank of Scotland, Lehman Brothers--these are the guys that have been with us for a long time and provide a lot of capital to us," he noted. In addition, with the increased revolver at the Station level, some large players who had previously not participated in the line joined up, including Merrill Lynch and J.P. Morgan.
