Divested of Rampart Casino, Cannery reports revenue dip, narrower loss
Revenue fell for Las Vegas-based Cannery Casino Resorts LLC in the second quarter as its 10-year-old operations lease ended at the Rampart Casino at the JW Marriott resort in Summerlin.
Revenue was off 9.1 percent on a year-over-year basis to $122.3 million.
The company, however, reported a narrower loss of about $138,000 in the quarter versus the $2.77 million lost in 2011's second quarter.
Cannery's results were reported Tuesday by an investor in the company associated with Oaktree Capital Management LP of Los Angeles.
The Oaktree affiliate said Cannery's revenue fell mainly because Rampart Casino's owner assumed management of the casino on April 1. Reduced operating costs related to the end of the Rampart deal led to the lower loss overall for Cannery Casino Resorts.
The revenue reduction was somewhat offset by a $3.5 million increase in net revenue from Cannery's casino at the Meadows racetrack in Washington County, Pa. That increase was driven by improved table game and slot machine results. Cannery has also opened a 1,300-vehicle parking garage there.
Net revenue was relatively unchanged at the Cannery hotel-casino in North Las Vegas and the Eastside Cannery in Las Vegas, the Oaktree affiliate said.
The affiliate noted that the recession had curtailed gaming and general discretionary consumer spending and that "there can be no assurance that our business, which has been severely affected by the downturn, will fully recover to pre-recession levels."
Issuance of the earnings report follows a move Aug. 2 by Moody's Investors Service in which it revised Cannery's debt rating outlook to negative from stable.
At the same time, Moody's affirmed the company's speculative-grade Caa1 Corporate Family rating.
"The change in Cannery's rating outlook to negative considers the near-term refinancing risk and the potential increase in the company's debt cost," Moody's said, noting Cannery has a $70 million loan expiring in February followed by May maturities of its first-lien term loan (approximately $155 million outstanding) and its delayed-draw term loan (approximately $130 million outstanding).
"While we expect Cannery has a reasonable chance of being able to refinance its capital structure given the quality of its casino properties, its modestly improving EBITDA (earnings before interest, taxes, depreciation and amortization), lower capital spending needs going forward and past sponsor support, we believe volatile capital markets and high leverage could make it difficult for the company to refinance in a manner that maintains the company's relatively low weighted average cost of debt. Cannery's weighted average cost of debt is currently at about 6 percent, but could increase significantly as part of any future refinancing," Moody's said in a report on the change in the rating outlook.