Penn National not expected to bid on Station properties
26 Jul 2010
By Arnold M. Knightly
By Arnold M. Knightly
But a company executive said Thursday the regional casino operator is not expected to participate in a planned bankruptcy court auction next month of 11 casinos currently controlled by Station Casinos.
Penn National executives were questioned about their interest in Las Vegas during the company's second-quarter earnings conference call with analysts Thursday.
The company, which operates 16 casinos and racetracks and 16 casinos in U.S. cities other than Las Vegas and Atlantic City and is developing new casinos in Kansas, Maryland and Ohio, saw its net earnings decline during the quarter, but still beat analysts expectations.
In June, Nevada gaming regulators granted Penn National a state gaming license, which was viewed as a preliminary step toward acquiring a casino or multiple properties on the Strip or in locals markets. Penn National, has long expressed an interest in Las Vegas.
When asked directly, however, about the planned Aug. 6 auction of a large chunk of bankrupt Station Casinos, as part of the company's proposed plan of reorganization, Penn National Chief Financial Officer Bill Clifford halted any speculation.
"I think we can say we're definitely not interested," Clifford said.
The planned auction covers such properties as Texas Station, the two Fiestas, Santa Fe Station, certain company land holdings and American Indian gaming contracts. Fertitta Gaming, a business formed by Station Casinos' founder Frank Fertitta III and Lorenzo Fertitta, has submitted a $772 million "stalking horse" or starting bid, for the properties.
Clifford told analysts just because Penn National is not planning to participate in the auction doesn't rule out the company's interest in other Station Casinos resorts. He briefly mentioned the Green Valley Ranch Resort, which Station Casinos owns jointly with the Greenspun family and is not part of the bankruptcy, as a property that might interest the company.
Clifford was also asked directly about the Rio, which is owned by Harrah's Entertainment and reportedly on the market.
"We're not really aware the Rio is for sale," Clifford said. "I mean we see what we see and heard what we've heard, but there is certainly no active process that involves us in any way."
Clifford said there is a large difference in what Penn National is willing to pay for a Las Vegas resort, and what the market considers reasonable.
"At this point I think we're pretty realistic that the valuations that people are expecting are probably not going to fit within our criteria," Clifford said.
Penn National said its net income in the quarter that ended June 30 was $9.2 million, or 9 cents per share, compared with $28.5 million, or 27 cents per share, in the same quarter a year earlier.
The results were negatively impacted by several one-time charges. Excluding the charges, Penn's net income would have been 29 cents a share, beating the estimates of analysts polled by Thomson Reuters, who predicted net income of 28 cents per share.
Penn National said its revenue rose 3 percent to $598.3 million, compared with $580.8 million in the same quarter a year ago.
Deutsche Bank gaming analyst Andrew Zarnett believes Penn National will focus on the regional markets, rather than investing in a Las Vegas property.
"Despite sluggish conditions for regional gaming in 2010, we believe that Penn National is extremely well positioned given their large cash balance, low cost of capital, highly diversified portfolio of assets and a rationale growth plan to safely weather this downturn," Zarnett told investors.
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