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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Bally Technologies looks to sell Rainbow Casino

27 October 2006

LAS VEGAS, Nevada -- Las Vegas-based Bally Technologies took steps Thursday to cut loose its last operating unit not associated with its core business of gaming equipment manufacturing.

The company, formerly known as Alliance Gaming, asked Credit Suisse Securities to evaluate a sale of the Rainbow Casino in Vicksburg, Miss. No timetable was given to complete a transaction and Bally Technologies said it wasn't sure if a sale could be reached.

The property, with 89 hotel rooms and a 35,000-square foot casino, has remained a part of Bally through two name changes and a four-year period where other company assets were sold.

Bally Technologies Chief Executive Officer Richard Haddrill said the company's continued expansion into the gaming systems business and an emphasis on slot machines sales over the last two years has taken its focus away from operating a casino.

"We believe it is appropriate to fully allocate our capital and management attention to the continued growth of these businesses," Haddrill said. "Consistent with our previous dispositions, we will carefully evaluate the market interest in Rainbow and proceed only if we believe we can obtain an attractive sale price and structure."

Bally Technologies spokesman Marcus Prater said business at the Rainbow picked up substantially over the past year in the aftermath of Hurricane Katrina. Customers displaced by the closure of casinos along the Mississippi Gulf Coast flocked to gambling halls in the state's river counties, such as Vicksburg and Tunica, sending monthly revenue in those locations up anywhere from 10 percent to 20 percent.

"Business spiked at Rainbow after the closures on the Gulf Coast, but it has steadily returned to more historical numbers since," Prater said.

The casino reported $52 million in revenue and $20 million in adjusted earnings before interest, taxes depreciation and amortization for the fiscal year ended June 30, 2005, the last official figures reported by Bally Technologies. The company has been restating earnings for the past two years.

The company said net proceeds from the Rainbow's sale would be used to pay down part of the company's long-term debt. In a statement, Bally Technologies said selling the casino would also dilute the company's earnings per share.

In addition to acquiring several gaming technology companies and their related intellectual property over the past four years, Bally Technologies has sold the Rail City Casino in Sparks, its slot machine route operations in Nevada and Louisiana, and a German-based international slot machine manufacturing division.