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Gaming Guru

Joe Weinert
 

Atlantic City Roundup

25 August 2003

ATLANTIC CITY -- Atlantic City casinos boosted their second-quarter cash flow by 4.3 percent despite challenging conditions.

The 11 casinos operating during the period reported gross operating profit, or cash flow, of $329 million on net revenue of $1.1 billion, up 1.2 percent, according to the New Jersey Casino Control Commission.

A weak economy, war in Iraq and bad weather hurt business, but the casinos managed to keep their expenses at the 2002 levels to make the best of a rough quarter.

"It's just a testament to the strength of that marketplace and what it's capable of doing," said analyst George Smith of Davenport & Co.

Bally's, which now includes the old Claridge Casino Hotel, led the city in cash flow at $55.4 million, up 4 percent over their combined totals last year. Caesars reported the biggest cash flow gain, up 15 percent to $48.9 million. Harrah's enjoyed the highest operating margin at 44 percent.

Donald Trump's casino company had a rough quarter, with cash flow at Trump Marina down 6.6 percent, Trump Taj Mahal down 6.4 percent and Trump Plaza up 1.1 percent.

The casinos averaged 95.4 percent occupancy in their 12,250 hotel rooms during the quarter, up 0.3 percentage points. The average rate per occupied room was $77.99, down $2.21.

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Taking no chances this time around, Trump Hotels & Casino Resorts hired an investment banker to recapitalize the company well before its next bond maturity.

Scott Butera, who was an investment banker at UBS Securities, joins Trump Hotels as executive vice president and director of corporate and strategic development.

"I have tremendous respect for the job Mark Brown (chief operating officer) and his team have done in optimizing the company's cash flows. Now is the time to focus on the company's strategic direction and capital structure," Butera said.

Job One for Butera will be to refinance the $1.3 billion in 11.25-percent first-mortgage notes due in May 2006. They notes are backed by Trump Taj Mahal and Trump Plaza. The company waited until the final year on its last refinancing - the debt backed by Trump Marina and Trump Indiana - and wound up paying effective interest rates of 12.75 percent and 17.625 percent.

"The goal, while not doing anything too quickly, is to try to be more timely and look at what all of our options are so we get more effective financing," Butera said.

Trump and Butera dismissed a suggestion that Butera was hired to restructure the $1.3 billion debt instead of trying to refinance it.

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Bus traffic to Atlantic City casinos is declining for the fifth straight year, according to the state agency responsible for counting such traffic.

James Crawford, executive director of the South Jersey Transportation Authority, said he expects that fewer than 7 million gamblers will arrive by bus, a decline of 10 percent over last year. An average of about 800 buses arrive daily, compared with a peak of 1,100 four years ago.

Casinos are increasingly directing their marketing efforts to more profitable drive-in customers instead of the price-conscious bus customers.

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Trump Hotels & Casino Resorts is preparing to compete with Atlantic City rival Park Place Entertainment for the 10th and final casino license in Illinois.

Trump Hotels, in partnership with 10 south suburban Chicago towns, said it will seek a new license from the Illinois Gaming Board. Park Place, on the other hand, has bid for the troubled - and unused - license held by Emerald Casino.

"We believe a riverboat gaming facility in this area is true to the legislative intent of the Riverboat Gaming Act in that it will provide an economic boost to an area where the recent economic downturn has been acutely felt," Donald Trump said.

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A reputed mob captain whose parole caused an uproar in New Jersey should not be allowed to gamble in Atlantic City casinos, the Division of Gaming Enforcement says.

The DGE has asked the Casino Control Commission to make Angelo Prisco, an identified capo in the Genovese organized crime family, the 164th member of the Exclusion List.

Prisco, who lives minutes outside of Atlantic City, was spotted gambling at Harrah's Atlantic City as recently as June 23. A cash player, records show that he bought more than $20,000 in gaming chips and received $2,400 in comps in 36 visits in the last decade.

A New Jersey judge in 1998 sentenced him to 12 years in prison for conspiracy to commit racketeering and arson for hire. The same year, he pled guilty to conspiring to extort the owners of a New York City nightclub.

The New Jersey State Parole Board, after twice denying him parole, suddenly released Prisco from prison last year after he hired the law firm headed by a political crony of Gov. James McGreevey.

A state grand jury is investigating the circumstances of Prisco's parole and the parole board has undergone significant changes. McGreevey has denied wrongdoing.

(Joe Weinert covers the gaming industry for The Press of Atlantic City. He can be reached at jweinert@pressofac.com.)