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Barron's Critic Bearish on Wynn

14 October 2002

LAS VEGAS --The initial public stock offering for Steve Wynn's $2.4 billion Le Reve casino resort in Las Vegas could be running into trouble, a Barron's commentator said in this week's issue.

The financial publication's Andrew Bary cited the recent drop in shares of gaming companies, the overall weakness in the stock market and concerns about the potential returns of Le Reve.

Wynn Resorts is seeking to raise about $450 million in an equity offering next week.

"The flamboyant Wynn is acknowledged to be one the great personalities in the history of Las Vegas, and he has prodigious skills at captivating even hardened investors with his imagination," Bary reported. "But Wynn also is fighting his reputation for extravagance and his checkered operating record as head of Mirage, which was sold to Kirk Kerkorian's MGM Grand in 2000 after a period of lackluster financial results, including a disappointing opening for Bellagio in 1998."

Wynn has commitments for $1 billion in bank financing through a group led by Deutsche Bank, and earlier-stage equity investors already have put up $600 million, with Wynn personally contributing $175 million. His companion $350 million junk bond offering could "very well fly, given its projected 11 percent yield," Barron's Bary said.

"But it will take a lot in the current environment to get equity investors to bet on a risky project that won't produce revenue until 2005," Bary wrote.

Barron's said the equity valuations for Wynn Resorts look "pricey, compared with MGM Mirage and Harrah's, which are far less risky than Wynn because of their established operations at multiple locations."

"One gaming investor says it doesn't make sense to bet on Wynn when, for the same price, investors can buy shares of gambling outfits that will generate ample earnings between now and the projected openings of Le Reve and (Wynn's casino in) Macau," Bary wrote.

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