Owner of Gary casinos casts 'doubt about the company's ability to continue' in SEC filing

GARY -- As casinos around them invest hundreds of millions of dollars on larger and more opulent gaming, entertainment and hotel venues, Majestic Star officials say they have quietly been undertaking some improvements of their own that have paid off in both revenues and numbers of visitors.

They point to a new baccarat room, slot machines, lighting and other changes made at the two Majestic casinos in Buffington Harbor as a sign of commitment to its players and the city of Gary.

But some observers say owner Donald Barden is merely doing repair and remodeling work that should have been done all along during the past 14 years, not the major investment needed in the highly competitive Northwest Indiana climate. They point to the company's Securities and Exchange Commission filing on Aug. 14, in which the company itself states "there is substantial doubt about the company's ability to continue as a going concern" and wonder if Barden has done too little too late.

Or is the casino mogul just biding his time in hopes of getting legislative approval to move one of the casinos to a more lucrative, land-based site near Interstate 94? That, observers say, could ultimately give Barden a winning hand against the competition.

That is the wish of Gary Mayor Rudy Clay, the Gary-based legislators, and Clay says, Barden himself.

"First and foremost, our focus right now is on getting legislative support for a land-based casino, to move one of Gary's casinos to I-94. Until we know about that, Mr. Barden should hold off on doing anything,' Clay said.

Larry Buck, the new general manager and senior vice president of Majestic Star Hotel & Casinos, did not say whether Barden is holding off in hopes of a land-based site, and he glossed over the possibility of a sale of one of Barden's licenses to another city in Indiana.

The way Buck sees it, the company has made several management changes, including naming him general manager in December 2008, and is now setting its own course at its current location and letting its competitors set theirs.

"We're out there intentionally trying to be what Horseshoe is not, what Ameristar is not," Buck said. "We're trying to be realistic in our expectations. We won't be cavernous, massive like Hammond. We're just trying to make these casinos comfortable for our customers."

"We're not playing the capital game," added Chris Corrado, vice president of marketing for the casinos. "We won't have wild swings. We'll stay even. It's not overly sexy, but it is steady and predictable."

They say Northwest Indiana is a very competitive market, and most casinos would be happy to make the approximately $20 million the two casinos rake in together each month.

Buck said the company's profitability has slipped enough that it could not pay the interest debt on its senior secured notes and secured notes in October 2008 and April 2009. But, he added, that gave the casinos the cash needed to finance the recent renovations.

Among the changes are 400 new slot models and machines, new carpeting and wallpaper on one floor of Majestic Star II, giving it a more elegant look. Majestic Star I, on the other hand, has a more festive, colorful look with louder music, more of a party atmosphere, Buck said. The Lakeshore Lounge has reopened with karaoke music and bands, and Passports Buffet reopened for lunch at a discounted price.

But the biggest change was the new baccarat room, done in an Asian motif and with the help of a feng shui expert. Large bamboo plants greet gamers as they walk into a room decorated in red and gold, the colors of luck. A buddha statue looks out into the room, again for luck, and a noodle bar provides nourishment. The renovation cost for this room alone was $750,000, but Corrado said it has already paid itself back.

"No one thing we've done here makes you say, 'holy cow!' But put them all together, and you can see things are going on," Corrado said.

Is it enough?

Ed Feigenbaum, editor of Indiana Gaming Insight, feels the casino operator is not doing enough to keep up with the competition.

"There is a significant difference between repair and renovation and capital improvement. Horseshoe Hammond had been undertaking a lot of renovation through the years before the new casino, and Majestic should have been doing the same," Feigenbaum said.

Feigenbaum does not know how long the state will be willing to let Barden Companies slide without paying its debt, and he said the other Northwest Indiana boats have been inching their way into Majestic"s niche -- the working man gambler. Feigenbaum said the other casinos have begun offering penny slot machines, which were a big draw for Majestic gamblers.

State Sen. Earline Rogers, D-Gary, said she is not certain about the state's degree of patience, but the casinos appear to have tested hers over the years.

"What's been most disappointing to me is the lack of substantial investment in the Majestic Star casinos. Initially, when it was the Trump and Majestic casinos, the response centered around the dollars needed to be split between the two facilities. Once Trump was no longer a factor, investment should have escalated in proportion, but it wasn't. Instead, investments were made into properties other than Gary," Rogers said.

She said part of the problem is that the other casinos have had several new owners through the years, each of which wanted to make their own mark with big investments. Barden has owned the Majestic since the beginning, and took over the adjacent Trump Casino several years ago.

"Gary was at the forefront of bringing casinos in this state. We were really the frontier," Rogers said.

What it needs now, according to Rogers, is to be at the forefront again. "We need to have a land-based casino."