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Analysts: Penn Proposal Bad Deal for Illinois

5 February 2004

ILLINOIS – As reported by the Chicago Tribune: "The fine print in an unusual and seemingly lucrative offer for a now-dormant Illinois casino license would virtually ensure the bidder a quick profit while saddling the state with payments on more than $700 million in new debt, gambling industry analysts said Wednesday.

"Penn National Gaming Inc., the Pennsylvania company that already owns Aurora's Hollywood Casino, says it is willing to pay $761 million to buy the license from the bankrupt Emerald Casino and then build a casino and hotel in Rosemont.

"Once the casino is completed, Penn National, one of seven companies bidding for the Emerald license, says it would transfer ownership of the complex to the state in return for a 20-year management deal worth about $40 million annually.

"…But analysts say that beneath the bold and enticing financial offer from Penn National is a proposal that anticipates the firm chipping in only $50 million in cash for the casino. It intends to borrow the other $711 million it would need to buy and build the casino, and the debt would be paid off by revenue from the facility once it is transferred to state hands, the analysts say.

"…'The only risk I see [for Penn National] is whether it's legal under the proposed bidding process,' said Marc Falcone, gaming analyst for Deutsche Bank Securities in New York…"

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