Casinos struggling with large debts can expect to receive increased pressure from lenders to make tough decisions concerning restructuring. These lenders are anxious to get their money back, which in some cases in excess of $1 million, due to the reduced amount of income that the industry is seeing across the board.
One executive of a casino who just recently came out a Chapter 11 bankruptcy said bankruptcy is a viable way for casinos to get back into the black. Tropicana CEO, Scott Butera said during a workshop at the Global Gaming Expo., “You can have a viable business if you have the appropriate capital structure. Bankruptcy allows you to get a second chance. There’s a huge advantage (in being able to reduce debt).”
The industry is very aware of the current economic state and casino operators are becoming more willing to restructure their debts either through a bankruptcy or with the creditors directly. Casinos are finding it hard to maintain a positive cash flow with the economy the way it is. Las Vegas alone has reported a 10 percent drop in visitors in September compared to last year, and almost a 3 percent drop for the first nine months of 2009. The decrease in traffic has affected the average price of a hotel room, dropping from $143 to $113.
With revenue down across the board, many casinos are finding that a bankruptcy is a very viable option, but it has a downside. Many competitors will see the bankruptcy as a chance to improve its market share by stealing away customers. This is obviously very bad for business, but sometimes is the only logical option for many casinos.
Even gaming regulators are urging troubled casinos to file for bankruptcy as a failed casino is viewed as a sign of weakness for the entire industry.
However, planning ahead could lead to a successful bankruptcy. “Plan your public relations well,” said Butera. Letting the public know that the company as a whole is still stable can keep customers from jumping ship.
Casino Creditors Are Getting Impatient With Debt-Ridden Casinos by Randolph Goldberg is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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