Las Vegas Casinos to Be Nationalized?
With Las Vegas casinos drowning in a sea of debt, it may only be a matter of months before they are all bank owned. The very casinos that originally were started by the mob, may now very well be taken over by Government owned banks. Yes, Nationalized Casinos. Sounds ludicrous, but let's look at the facts:
The big players in Las Vegas are all dancing with the dreaded 'D' word: Default.
Moody's Investors Service on Wednesday cut Harrah's Entertainment Inc credit rates to a deeply speculative grade and cited concerns the casino operator will default on its debt as gaming revenues decline. Moody's also predicts things will get worse for the casino giant, as they are indicating an additional downgrade is more likely in the next 12 to 18 months.
With banks reluctant to lend money in the downturn, Harrah's must now try to negotiate with lenders and hope they are willing to gamble on the prospect of a distant rebound rather than foreclosing on casinos in a hasty grab for cash.
At present, Harrah's has just enough cash to cover interest payments. They are in a negative cash balance position, as they are out of money for operations.
MGM, Riviera, and Stratosphere are also in a 'house of pain' right now, as they try to tread water in mounting debt.
MGM-Mirage, which is the largest employer in town with ten resorts, has borrowed billions to build the 'City Center', the biggest project ever in Las Vegas. Although the project is set to open this year, the questions is now whether MGM-Mirage will default on its debt payments. MGM is also negotiating with their lenders, but if they can't reach a deal, bankruptcy looms on the horizon.
Yesterday, Station Casinos pulled out of a nosedive when they announced their lenders are giving them more time to restructure their debt and operations. The company had said it may have to file for bankruptcy protection if agreements could not be reached with its lenders.
It is ironic to note, that the winners in this situation would be the banks, despite the fact that they were the ones who should not have lent out so much money in the first place. The banks are now being rewarded with astronomical bailout, and will eventually be Government owned.
With Citibank and other banks now headed to the 'pink sheets', even Wall Street realizes that the markets will continue to sink until the band-aide is simply ripped off and Bank Nationalization is in place. The way things are currently, the reserve money that banks originate the loans from comes from the Fed and taxpayers anyway.
Just think, you the citizen, may very well be an owner of a casino soon.
Payton O'Brien, Gambling911.com Senior Editor
