PNK 3Q09 CONF CALL TRANSCRIPT

Another sloppy quarter from a regional gamer. We're not feeling great about the next few quarters either.

 

 

PNK 3Q09 CONF CALL

 

Property commentary

  • Market share at Lumiere grew to 19% in 3Q09  from 15% last year
  • Bossier city benefitted from higher hold to the tune of $200k in EBITDA 
  • Belterra admissions increased 2.2%, despite spend per visitor decreasing.  Hotel occupancy also increased
  • Boomtown New Orleans revenues look to have stabilized on October, finally
  • Reno market continued to experience decline, but it looks like gaming revenues are stabilizing
  • Argentina was impacted by H1N1, currency, and inflation
  • Corporate expense - down 14% YTD and 2.3% in the quarter

Balance sheet

  • Have about $145MM of net cash
  • Amended credit facility in July for a price of 50bps incremental spread, 50 bps upfront fees, and a 15% reduction in committment
  • Issued $450MM of new debt and used proceeds to repay their most restrictive bonds and bank outstanding
  • Bottom line they increased liquidy and financial flexibility to pursue their development pipeline
  • They still need an extension on the credit facility, hopefully by the end of the year

 

Contruction Update

  • River City cash budget $357MM of which $228MM was already spent
  • Sugarcane Bay cash budget is $391MM
  • Baton Rouge asked for more extensions which were granted.  Allowed them to get a max price contract by 1Q2010. Will start construction in May 2010

Q&A

  • Heighted competition in some markets, elaborate
    • Penn opened a new riverboat near Belterra
    • Indiana Downs also opened a new permanent facility vs a temporary tent
    • In New Orleans had several weak months over the summer due to the economy and promotions offered on the Mississippi Gulf Coast. (Like Beau Rivage)
    • Lake Charles, they do $400/ day while Delta Downs does $300/ day.  Delta Downs was aggressive on the promotional side - Dan Lee got defensive regarding BYD's comments about lack of demand to expand at Lake Charles. 
    • Entire Reno market still hurting from Indian gaming in CA
  • Timing of CapEx spend on Baton Rouge and Sugarcane
    • Sugarcane to be $425MM next year
    • Baton Rouge near $60MM
    • Maintenance capex of $40
  • Plan to have the R/C rolled over before they start construction of Sugarcane
  • Not seeing much cost reduction in construction
  • When would Baton Rouge open?  Contract calls for opening with 18 months of contruction so the earliest they can open is late 2011. Think that that is a reasonable time
  • Very honest on cannabilization on Lumiere when River City opens. Think that they can do $120-130MM across the 2 properties at marturity
  • Slower growth in Southern Louisiana due to being at capacity (re: L'Auberge)
  • Trends in Oct at L'Auberge? Continued at the 3Q09 pace, but Dan is more optimistic about Nov & Dec
  • Will order the steel by year end for Sugarcane Bay - assume that the extension of the bank line will be done by then
  • Hope that both Sugarcane Bay and Baton Rouge do a 15% cash on cash return.. won't break out the property's results (meaning L'Auberge / Sugarcane since Sugarcane is really just an expansion)
    • Good luck on that
    • L'Auberge should open in 2011

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