SMOKING AND GAMBLING WON'T MIX

Research Edge recently held a consumer bankruptcy conference call. One of my slides covered the impact of a hypothetical smoking ban across the regional gaming markets, a distinct possibility over time. Following sharp declines in revenues in Illinois and Colorado, some short sellers have focused on the smoking ban to press the regionals. I estimate a worst case scenario of a 20% decline in EBITDA. The impact on the credit ratios is not as severe as I would've thought. Leverage obviously increases but with only ISLE in the danger zone. With the exception of ISLE, coverage ratios remain in good shape even after the EBITDA reduction. ISLE will still cover interest and should have liquidity until 2012. ASCA and PNK have large credit facility maturities in late 2010 which could present a liquidity problem for both companies should the credit environment remain unfavorable.


Even after 20% decline from a potential smoking ban, most regional operators maintain decent credit ratios