BYD: UPDATE FROM LAS VEGAS

Here are the BYD notes from our Las Vegas trip last week

Las Vegas Locals:

  • BYD doesn't think the unemployment level matters as much as consumer confidence
  • People have adjusted
  • They believe that they are at a bottom
  • We were surprised they weren’t more negative on this market given current economic factors

New supply in LV Locals:

  • M resorts, Cannery East, Red Rock, South Coast, Aliante. (Cannery, Aliante, M resorts)
  • There is little change in the promotional environment other than some more free play.  There has been a rational response to M coming online
  • Going forward, there is not a lot of new stuff coming online

Blue Chip:

  • It is too early to tell about Firekeepers. It is likely to steal a lot more business from Four Winds as it is within an hour from their property
  • Competition is as rational as they could hope.  Wouldn't want to open the tower in this economy and they aren't getting the return they want

Borgata/AC:

  • MGM in AC - If MGM has to exit - they may not want to buy the other half of Borgata. They can't buy the other half without causing some covenant issues/amending existing agreement
  • Impact from PA - There is very little impact from Bethlehem.  Table games will probably have an impact on them
  • AC - Revel won't be good for them. They think that the timeline laid out was aggressive
  • There is $20mm of dividend payments from Borgata annually

Stations:

  • They are very interested in Stations
  • Offered $950 million on the OpCo – can do that under the existing financing
  • Timing is uncertain – they have an exclusivity period of 120 days

Echelon

  • Pretty buttoned up on capex
  • They had $90mm to payout and it’s mostly done
  • No deadline to do anything there – need an economic recovery and with it, clarity on what is happening on the Strip
  • $700mm was of construction costs incurred on the property

Capex:

  • They are still buying slots
  • Spending 50mm on maintenance (used to be 120mm) – slots was 50% of that but now it is more than 50%
  • They can maintain the lower level of capex for 2 years
  • Properties are very fresh and there is no need to increase the level of capex at present
  • All cash is going to pay down debt
  • Final payment on Danai Jai Alai – $47m + interest will be made in Q12010

Credit facility:

  • May 2012 – maturity of bank line
  • Going out beyond 2012 for a bank line is too expensive
  • They will leave the credit facility in place for now

Acquisitions:

  • No fixed multiple for an asset
  • One problem is that they can't buy anything cheap

Downtown:

  • Still a good niche operation
  • $700-$1,500 package deal from Hawaii
  • It is difficult to steal from the downtown market because everything is cheaper there - harder to relocate
  • 3Q - will not be an easy comp but 4Q will be
  • For downtown - need to see fuel indices

Louisiana:

  • Never really participated in the bubble
  • Oil prices are helping. Delta downs - had easy comps due to the hurricane
  • They are doing creative marketing
  • Treasure Chest – there is more competition. Plus Katrina money is leaving. Business is derived almost exclusively on a local basis; there is no hotel at the property

General commentary:

  • It’s all about spend-per-visitor
  • It’s just a question of confidence
  • Non-rated business got hurt the most - lower priority. They are higher margin customers too