Atlantic City casinos forced to close
Budget standoff in N.J. halts gambling; parks and beaches affected
By Michael Baron & William Spain, MarketWatch
Last Update: 6:18 PM ET Jul 5, 2006
<LABEL class=StoryContent id=StoryContent_Content>NEW YORK (MarketWatch) - The gambling halls of Atlantic City went dark early Wednesday as New Jersey's budget stalemate shut down the government and kept regulators off the casino floors.
All 12 of the city's casinos were closed at 8 a.m. as the government shutdown entered its fifth day. New Jersey's state parks, beaches, historic areas and motor vehicle offices were also shut, as was the state's lottery system and road construction.
The failure of the state legislature to approve a $31 billion budget submitted by Gov. Jon Corzine began the process of shutting down the government over the weekend. One of the main issues in dispute is Corzine's proposal to raise the state sales tax to 7% from 6%, and how that money would be used.
"There is a very uncomfortable, almost eerie atmosphere in the Atlantic City casinos now," said Joe Weinert, vice-president at Spectrum Gaming, a consultancy. "The lights still beckon gamblers, yet the machines flash 'Out of service.' Patrons seem to be afraid of stepping into closed-off areas while also grumbling about the ineptitude of New Jersey government."
The shutdown "has the potential to impact the lower-earning and most highly leveraged properties the most," including Trump, he said. But "they might face real trouble only if this situation becomes prolonged, which nobody at this point expects. There is a general sense that the budget impasse will be resolved by the weekend. But who knows?"
It also helped trim the shares of casino operators with properties in the market, the country's second largest after Nevada.
Boyd Gaming (BYD Boyd Gaming Corporation
<IMG class=pixelTracking height=1 width=1 border=0>BYD ) fell 1.4% to $39.35. The company runs the Borgata in a joint venture with MGM Mirage (MGM MGM Mirage
<IMG class=pixelTracking height=1 width=1 border=0>MGM ) , which lost about 1.4% to $40.25. Harrah's Entertainment (HET Harrah's Entertainment, Inc.
<IMG class=pixelTracking height=1 width=1 border=0>TRMP ) was slapped down more than 4% to $19.38.
All of Trump's casinos are in Atlantic City. While the company's financial footing has improved since a new executive team removed its eponymous founder from any participation in management, it is still highly leveraged and any loss of revenue will pinch.
Rob Stillwell, a spokesman for Boyd, said that "we are managing this hour-to-hour. All other amenities are open and we still have people arriving."
There have been some cancellations, he added, but it is still too early to tell what kind of impact the shutdown will ultimately have.
"We are holding out hope that some resolution is reached sooner rather than later," Stillwell said.
Deutsche Bank analyst Bill Lerner said the shutdown is a temporary negative for the gaming sector, estimating that a closure of four to five days would cut earnings by 1 cent for Boyd, but the move could have more far-reaching effects.
"We would not minimize the longer-term impact of this likely short-term inconvenience, particularly for high-frequency ... customers in the face of upcoming convenience gaming in Pennsylvania," Lerner wrote in a note to investors.
"We note that the casino industry pushed hard over the weekend to remain open by appealing to numerous courts, including appearances before a [state] Supreme Court justice and Superior Court but was rebuffed by both," Lerner wrote.
The shutdown represents the first pause in the coastal resort since 24 hour gambling was allowed in the early 1990s, according to The Star Ledger newspaper, which reported that state police cleared all players from gaming floors at the deadline.
Analyst David Anders at Merrill Lynch said, "Our estimates remain unchanged given the fluidity of the situation [but] should the shutdown persist beyond a few days, we may be forced to temper our [third-quarter] estimates for the affected companies."
An "extended shutdown will have a more substantial impact on our estimates, but should not affect long term value," Anders said. "A larger concern of ours would be if the legislature raises the gaming tax on casino companies in an effort to plug the budget shortfall."
Michael Baron is a reporter for MarketWatch in New York.
William Spain is a MarketWatch staff writer in Chicago.
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Budget standoff in N.J. halts gambling; parks and beaches affected
By Michael Baron & William Spain, MarketWatch
Last Update: 6:18 PM ET Jul 5, 2006
<LABEL class=StoryContent id=StoryContent_Content>NEW YORK (MarketWatch) - The gambling halls of Atlantic City went dark early Wednesday as New Jersey's budget stalemate shut down the government and kept regulators off the casino floors.
All 12 of the city's casinos were closed at 8 a.m. as the government shutdown entered its fifth day. New Jersey's state parks, beaches, historic areas and motor vehicle offices were also shut, as was the state's lottery system and road construction.
The failure of the state legislature to approve a $31 billion budget submitted by Gov. Jon Corzine began the process of shutting down the government over the weekend. One of the main issues in dispute is Corzine's proposal to raise the state sales tax to 7% from 6%, and how that money would be used.
"There is a very uncomfortable, almost eerie atmosphere in the Atlantic City casinos now," said Joe Weinert, vice-president at Spectrum Gaming, a consultancy. "The lights still beckon gamblers, yet the machines flash 'Out of service.' Patrons seem to be afraid of stepping into closed-off areas while also grumbling about the ineptitude of New Jersey government."
The shutdown "has the potential to impact the lower-earning and most highly leveraged properties the most," including Trump, he said. But "they might face real trouble only if this situation becomes prolonged, which nobody at this point expects. There is a general sense that the budget impasse will be resolved by the weekend. But who knows?"
It also helped trim the shares of casino operators with properties in the market, the country's second largest after Nevada.
Boyd Gaming (BYD Boyd Gaming Corporation
<IMG class=pixelTracking height=1 width=1 border=0>BYD ) fell 1.4% to $39.35. The company runs the Borgata in a joint venture with MGM Mirage (MGM MGM Mirage
<IMG class=pixelTracking height=1 width=1 border=0>MGM ) , which lost about 1.4% to $40.25. Harrah's Entertainment (HET Harrah's Entertainment, Inc.
<IMG class=pixelTracking height=1 width=1 border=0>TRMP ) was slapped down more than 4% to $19.38.
All of Trump's casinos are in Atlantic City. While the company's financial footing has improved since a new executive team removed its eponymous founder from any participation in management, it is still highly leveraged and any loss of revenue will pinch.
Rob Stillwell, a spokesman for Boyd, said that "we are managing this hour-to-hour. All other amenities are open and we still have people arriving."
There have been some cancellations, he added, but it is still too early to tell what kind of impact the shutdown will ultimately have.
"We are holding out hope that some resolution is reached sooner rather than later," Stillwell said.
Deutsche Bank analyst Bill Lerner said the shutdown is a temporary negative for the gaming sector, estimating that a closure of four to five days would cut earnings by 1 cent for Boyd, but the move could have more far-reaching effects.
"We would not minimize the longer-term impact of this likely short-term inconvenience, particularly for high-frequency ... customers in the face of upcoming convenience gaming in Pennsylvania," Lerner wrote in a note to investors.
"We note that the casino industry pushed hard over the weekend to remain open by appealing to numerous courts, including appearances before a [state] Supreme Court justice and Superior Court but was rebuffed by both," Lerner wrote.
The shutdown represents the first pause in the coastal resort since 24 hour gambling was allowed in the early 1990s, according to The Star Ledger newspaper, which reported that state police cleared all players from gaming floors at the deadline.
Analyst David Anders at Merrill Lynch said, "Our estimates remain unchanged given the fluidity of the situation [but] should the shutdown persist beyond a few days, we may be forced to temper our [third-quarter] estimates for the affected companies."
An "extended shutdown will have a more substantial impact on our estimates, but should not affect long term value," Anders said. "A larger concern of ours would be if the legislature raises the gaming tax on casino companies in an effort to plug the budget shortfall."
Michael Baron is a reporter for MarketWatch in New York.
William Spain is a MarketWatch staff writer in Chicago.
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