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Analyst Outlook for Atlantic City Casinos Grim

17 October 2003

ATLANTIC CITY, New Jersey – As reported by the Press of Atlantic City: "The gaming industry's poor September revenues foreshadow an ugly fourth quarter as casinos fight for business lost to the new Borgata Hotel Casino & Spa, Wall Street analysts are warning investors.

"Analysts sounded the alarm less than 24 hours after the Casino Control Commission reported a 12 percent decline in September gambling revenue at the 11 casinos open a year earlier.

"`Conditions remain weak, there is little real growth and competitive conditions are intensifying. Even more disturbing, we are beginning to see an increase in promotional spending,' John Kempf of Goldman Sachs said in a research note.

"Borgata, which opened July 2, increased the city's supply of slot machines by 9 percent, table games by 11 percent and casino hotel rooms by 16 percent. Although Borgata has quickly become the city's second-highest-grossing casino (behind Bally's), it has helped boost citywide casino revenue by only 5 percent.

"…Borgata will force other casinos to spend heavily on incentives to recapture their customers, analysts said. The resulting decline in profits will result in more lost jobs, said Michael Pollock, publisher of the Gaming Industry Observer.

"… Analysts said it will be difficult for casinos to stay still while Borgata continues its broad-based marketing and promotional blitz.

"…Analysts are projecting sharp declines in fourth-quarter cash flow, which is earnings before interest, taxes, depreciation and amortization, a key measure of profitability and valuation in the gaming industry…"

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