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Wednesday, May 02, 2007

Fatal Blow Or Mere Blip?

- The big question about MGM's pullout from the Aqueduct racino is whether this constitutues a fatal blow to NYRA's franchise bid....or if it's just a bump in the road to overcome, much like the Steinbrenner family's withdrawal from Excelsior. NYRA, naturally, opts for the latter.

"What has become clear to NYRA over the past few years is that there is no shortage of marquee gaming companies that would like to manage the VLT project at Aqueduct," [NYRA chairman Steve Duncker] said.

"The project is in an advanced stage of planning, and I anticipate that NYRA will be able to seamlessly introduce a replacement for MGM in relatively short order." [Albany Times Union]
And that seems to make sense. I'd imagine that any self-respecting casino company would jump at the chance to erect a slots parlor in New York City - even if it's in Ozone Park. But that being the case, why did MGM pull out?
"It's no longer worth it," said Alan Feldman, MGM's senior vice president for public affairs. "This was first proposed four years ago. Since then, we've doubled in size. There's too much else going on. That's the bottom line."

MGM is currently investing more than $10 billion developing a half-dozen resorts and casinos from China to the Middle East.
"When we started this, we were a very different company," Feldman said. "We had just merged with Mirage and were seeking to expand. It looked like it could be a nice return for shareholders, a modest investment.

"To get this to come to a conclusion could take another few years, and there could be litigation involved." [Saratogian]
MGM was obviously frustrated with the constant roadblocks thrown up by the state, which is certainly understandable. (Duncker took a shot at the State in that regard when he told the NY Post: "Clearly, some [obstacles] were self-inflicted, while others were the work of a few who desired to see NYRA fail in order to advance their own agendas."]

But despite the delays, the escalation of costs, and their grand international ambitions, the move comes as a shock, especially since we're told that an agreement was close (though we've been told that for months). I'm especially surprised given the fact that the contract was awarded in a no-bid process that drew the ire of NYRA critics and rival bidders, with terms that had to be favorable to MGM, even though the state conceded that it was fair. And given the rosy predictions of a $400-$500 take per machine, it seems like a no-brainer even if they were going to have to loan NYRA a few tens of millions of dollars more than originally planned.

So I'm wondering if perhaps MGM is taking a look at the growing competition from Pennsylvania and other nearby states, as well as from the possible Catskills casino; and, in addition, noting the far lower take per machine figures being produced at Yonkers. Maybe they're figuring that it's not such as good deal after all. If MGM thought that Aqueduct would be the "slam dunk" (I hate that phrase) that all of the bidders are claiming it is, one would think they'd stick it out. I imagine that some other casino outfits are going over all the numbers and projections as we speak. NYRA's fate may depend on how accurate they think they are.

1 Comment:

horsecharles said...

To paraphrase Tenet "NYRA exit left is a slam dunk". Spitzer et all have zero reasons to want NYRA back.
Even if by chance someone different had won the governors race AND they favored NYRA, they would have little potential upside but plenty of exposure.

And I don't blame MGM. Who wants to deal with two-faced & uninformed but yet micro-managing politicos...extortionate taxes...
Who would want to even chance enduring something like how Spitzer manhandled & slandered the biggest banks in the US re credit card gambling processing, not to mention NYRA?
Even worse, for that small addition $$ addition to their bottom line(relatively speaking), why risk some future unfounded political witchhunt that could disastrously impact licensing in other jurisdictions?

MGM's just too exposed-- our bureaucrats have them by the nads & competition can be cutthroat: politicos can do the same to MGM that they did to Citibank et al + NYRA: to oust them & bring in someone willing to pay $$$.
Politicos can legislate say, unfavorable decreases in machines / increases in hold, limit slots to one track only... they could nitpick over some minor infraction, add plenty of negative spin & turn it into an agreement to leave town / pay a hefty fine in exchange for a non-prosecute.

Without doing anything wrong, MGM could wind up leaving town with a loss & its reputation besmirched. Following that, they could endure lincensing headaches in other jurisdictions...enough to scuttle or slow down some projects; subsequently Wall Street, then lenders / investors could develop jitters... in a worst-case scenario avalance that could sink the entire company.

None of what I've stated is probable, but why should MGM endure such an unfriendly environment when they likely have worldwide jurisdictions up the kazoo courting them?

There are just too many more uncertanties / nothing is written in stone. One of the racetracks could be sold, NJ could decide to put slots / card rooms in Meadowlands / Monmouth.
Running a few VLT's is just not a prestigious or even large enough project for if it included real slots, card room, running simulcast parlor / account betting, that'd be a different story.