Price seems reasonable. Given low borrowing rate, deal should be very accretive, particularly with synergies included.
CONFERENCE CALL NOTES
- Property generated $41 EBITDA as of May 11 2011; in addition, at least $5 MM in purchasing synergies (e.g. insurance) is expected, which can improve margins.
- $1BN market; market grew 2% in 1Q 2011.
- #2 property in the market; similar customer type to Beau Rivage
- 13 acres of undeveloped land on the property - can be used for additional hotels/retail facilities
- Priced at 7.2x multiple including synergies and $44m in incremental capital
- Net debt will increase by 150-200MM to fund purchase net of jai lai sale in FL
- 560MM in RC availablity: 64% of commitments related to extended portion
- Plans to use extending portion of debt to fund purchase; non-extending portion of credit facility (330MM) will mature in May 2012.
- Completely unrelated to whether or not they buy Borgata
- 2,500 lot parking garage
- B Connected program will be deployed immediately after the acquisition is approved.
- Other BYD properties impact:
- Treasure Chest will benefit the most from this acquisition since it's pretty close and IP can give the local New Orleans customers a more destination-type experience.
- Shreveport property (Sam's Town) under pressure from Native American gaming in Oklahoma.
- Insurance market: stable to slightly decreasing
- $20MM D&A run rate; should use Blue Chip as a proxy
- $44MM Capex used:
- Will be spent across 10-12 months
- Slot product--pretty up-to-date; don't see much need for replacements
- De-leverages balance sheet by 50 bps
- Property Maintenance capex: 5-8MM
- Covenant risk not an issue
