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Black Gaming may briefly close Mesquite casino14 November 2008
LAS VEGAS, Nevada -- Mesquite may lose a casino, at least for a while. Black Gaming may temporarily close one of its three Mesquite properties to cut costs, according to a Nov. 3 update to a bank agreement after the gaming company defaulted on a loan. Company Chairman and Chief Executive Officer Randy Black Sr. this week would not say which of the casinos -- CasaBlanca, Virgin River or Oasis -- could be closed or when it might happen. "Revenue declines have accelerated," Black said during Wednesday's earnings call. "Although we have reduced expenses in every effort to keep pace, we're faced with the prospect of having to take increasingly more drastic steps to reduce our fixed expenses. Compounding these issues, our balance sheet is ill-prepared to support further operational decline." The bank agreement, outlined last week in a filing with the Securities and Exchange Commission, runs through Jan. 15. Based on this, any casino closure would last only until then unless the deal with the bank was updated. The closing of a property, however, is far from a sure thing. The company, which operates 80 miles northeast of Las Vegas, is also considering restructuring, refinancing or recapitalizing the company. Black led an employee meeting Wednesday to discuss the company's status. Black Gaming posted a net loss of $10.1 million in its third quarter ended Sept. 30, up from a $7.9 million net loss a year earlier. The latest loss came even as expenses decreased 16.1 percent, or $6.4 million, in the quarter. Third-quarter revenues dropped 23.6 percent to $28.2 million from $37 million. The default centers on a $15 million credit facility through Wells Fargo, due June 30, 2011, that fell out of compliance when 12-month cash flow fell below covenant terms. Third-quarter cash flow, defined as earnings before interest, taxes, depreciation and amortization, was at a negative $900,000, a swing from the positive $1.3 million cash flow realized last year. Nine-month cash flow is down 34.5 percent at $10.3 million from $15.7 million. Black said on the call that he foresees future covenant violations. The credit facility is only part of $188.7 million in company debt with interest rates hovering in the double-digit range. Black said working capital requirements, capital expenditures and scheduled interest payments should be covered by operating cash flow and cash on hand through December. Additional funds, however, will be needed to meet the company's funding requirements next year. "Needless to say, Black Gaming has some significant hurdles," Black said. "Outside of a newly elected president, not much else appears to be changing in terms of customer sentiment or spending habits." Copyright GamingWire. All rights reserved. Related Links
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