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Atlantic City Roundup

17 November 2003

ATLANTIC CITY – As reported by the Press of Atlantic City: "The New Jersey Casino Control Commission found that Tropicana Casino and Resort has the financial wherewithal to merit a four-year license renewal despite the uncertainty of its damaged expansion project.

"Still, because of the fatal Oct. 30 collapse of a parking garage under construction, the commission ordered Tropicana to submit revised financial forecasts within 90 days. The $245 million expansion project, the cornerstone of the casino's future, had been scheduled to open March 1. The project will include 502 hotel rooms, 2,400 parking spaces, convention space and a 225,000-square-foot themed retail area.

""While I believe that Tropicana and Aztar are and will continue to be financially stable, this commission would be remiss if it did not consider the potential effect of the construction accident," commission Chair Linda Kassekert said.

"Aztar President Robert Haddock said he cannot say when construction will resume nor when the project might open.

""We're assuming the whole project will continue at some time, including the garage. At this stage there is not a plan that has been put in place for the components to proceed," he said.

"Two days earlier, authorities allowed Tropicana to reopen the other half of its existing garage and the skywalk leading to it and the 604-room West Tower. Both facilities had been closed out of fear that a wobbly, freestanding concrete wall from the under-construction garage could come crashing down. Although the West Tower opened one week after the collapse, room service was suspended because the skywalk was still closed. Guests had to use a Pacific Avenue crosswalk to access the West Tower and the existing garage.

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"Atlantic City casinos rebounded from a poor September to win $380.7 million from gamblers last month, a 9.2 percent gain compared to the same month last year. The gain was due chiefly to the new Borgata Hotel Casino & Spa, as same-store revenue declined 3.1 percent. Borgata won $42.8 million for a market share of 11.2 percent.

""We were somewhat disappointed with the results," Goldman Sachs analyst John Kempf said. "We were surprised by this (same-store) decline, having heard several operators say that the month of October was strong."

"Bally's topped the revenue list at $55.9 million, for a gain of 1.1 percent and a market share of 14.7 percent.

"On a company basis, Harrah's Entertainment and Park Place Entertainment both reported revenue gains for the first time since Borgata's July 2 opening: Harrah's up 0.5 percent and Park Place up 1.7 percent.

"Trump Hotels & Casino Resorts continued to lose ground, with a collective decline among its three casinos of 6.1 percent.

"Citywide gambling revenue through the first 10 months this year was $3.8 billion, 1.8 percent ahead of last year's pace.

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"Donald Trump's casino company is feeling a double pinch from the Borgata. Not only has Borgata taken business from Trump Marina, but the resulting decline in cash flow will trigger a bond covenant that hikes the interest rate by either a full or half percentage point.

"Trump Casino Holdings, which includes Trump Marina and Trump Indiana, pays holders of its $490 million in mortgage notes an interest rate of 11.625 percent. The bond indenture requires the rate to rise a half-point if the ratio of first mortgage notes ($425 million) exceeds 4.8-to-1 and a full point if it exceeds 5.3-to-1.

"Trump Casino Holdings reported that it expects its interest expense next year to increase by either $2.5 million or $5 million.

"Separately, Trump Hotels reported that, among other things, it would consider selling an asset to ease its $1.8 billion burden of junk-bond debt.

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"Park Place Entertainment signed a revised deal to build a $500 million tribal casino about 25 miles from the New Jersey border in New York's Catskill Mountains.

"The National Indian Gaming Commission told both sides that the 2000 deal negotiated between former Park Place CEO Arthur Goldberg and the St. Regis Mohawk Tribe was unacceptable.

"Park Place will now receive 30 percent of pretax income; the old deal gave Park Place 30 percent of earnings before interest, taxes, depreciation and amortization. The new deal also calls for the Mohawks to pay Park Place a one-time development fee of $15 million and to assume funding and development of a $40 million parking garage.

""We would have required it any way as the new incoming (tribal) council. There were a number of areas we thought could have been rewritten to be more fair," Mohawk Chief James W. Ransom said.

"Plans call for 750 hotel rooms, a 160,000-square-foot casino, eight restaurants, a spa and meeting space. Numerous federal, state and local regulatory issues need to be resolved before breaking ground.

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