By Bowdeya Tweh, Times of Northwest Indiana
bowdeya.tweh@nwi.com
After missing three interest payments on its debt, a Gary casino operator was dealt another blow after lenders in a loan and security agreement declared the company in default of its requirements.
On Oct. 30, The Majestic Star Casino LLC received a default notice from the lenders of a $79.4 million loan to speed up payment obligations, according to a Nov. 5 filing with the Securities and Exchange Commission.
"We're looking at all alternatives available," said Jon Bennett, the company's senior vice president and chief financial officer. Bennett said he couldn't comment on what avenues are being pursued.
It wasn't immediately clear Wednesday what the current state of negotiations were with lenders and the company on renegotiating the payment schedule or restructuring operations.
Majestic Star Casino LLC owns two Majestic Star casinos and a hotel at Buffington Harbor, a casino-hotel in Tunica County, Miss., and a casino in Black Hawk, Colo.
The casino company and its subsidiaries already were in default with two sets of bondholders after missing a $24 million interest payment on Oct. 15, 2008, and two subsequent interest payments this year on April 15 and Oct. 15.
The company reported a $10.3 million loss in the quarter ending June 30 in an unaudited quarterly SEC filing. Last year, it posted a $150.4 million loss, up from a loss of $26.1 million a year earlier.
But the company's Gary properties and its other resort venues were profitable in the quarter ending in June. Operating income for the Majestic Star I and II in the quarter was $9.8 million, up 25 percent from the same three-month period in 2008.
Majestic Star's Bennett said Northwest Indiana is a "highly competitive market" and other casinos in the area have launched or expanded their offerings. One problem is that the competition increased just as the economy "went into the tank."
"I think we need to see a lift in the economy in order to gain any traction in terms of improved revenue performance," Bennett said. "That's not to say we won't market, promote and continue to grow our revenue."
Citing difficult economic conditions, the company said in an Aug. 14 regulatory filing it anticipated skipping payments on outstanding loan amounts. It also suggested it might file for bankruptcy.
"Given the current valuations for regional gaming companies such as ours, the weak economic environment, our diminishing cash flows, and the reduced availability of debt and equity capital ... it is unlikely that any restructuring plan can be consummated outside a bankruptcy proceeding," the filing said.
Ed Feigenbaum, the publisher of Indianapolis-based Indiana Gaming Insight newsletter, said although it's unclear what Majestic Star Casino will do, there's a precedent for missing debt payments. Indianapolis-based Centaur LLC, operator of Hoosier Park Racing & Casino in Anderson, filed for Chapter 11 bankruptcy protection last month after missing payments to lenders, but the company's properties are still operating.
"If the folks that own the debt wanted the property, they probably would've taken it over a year ago," Feigenbaum said about the Gary properties. "It's not a good time to own a casino company."
Majestic Star Casino and its subsidiaries listed $406.4 million in assets and $749.6 million in current liabilities as of June 30.