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Analysts say outlook improving for Cannery Casino Resorts

/ Las Vegas Sun

Gamblers fill up video poker machines in the coin slot area at Eastside Cannery Thursday, April 15, 2010.

The financial outlook appears to be improving for Las Vegas-based Cannery Casino Resorts LLC, despite the nonrenewal of its management contract for the Rampart Casino in Summerlin.

Standard & Poor’s Ratings Services on Friday revised its rating outlook on Cannery to stable from negative and affirmed its "B-" corporate credit rating and other ratings on the company.

Standard & Poor’s analysts said in their report that Cannery has outperformed expectations in recent periods with EBITDA – a key performance indicator – growing in the low-single digit range in 2010 vs. expectations of an EBITDA decline.

EBITDA means earnings before interest, taxes, depreciation and amortization.

"Cannery continued to perform well through the first quarter of 2011, with a high-single-digit percentage increase in net revenue and a roughly 40 percent increase in EBITDA," the S&P report said.

EBITDA in 2011 is expected to increase by 10 percent, driven largely by the Meadows Casino in Washington, Pa., southwest of Pittsburgh. That property generates almost two-thirds of Cannery’s EBITDA and like other Pennsylvania casinos is benefiting from the addition of table games in that state.

In April, the Meadows won $2.6 million at its tables and $21.5 million from its slot machines, the Pennsylvania Gaming Control Board reported.

In the Las Vegas area, where Cannery has two properties by that name and has been managing the Rampart Casino, Standard & Poor’s said it expects the locals market to stabilize this year and then grow modestly.

"We believe gradually improving economic indicators, and recent performance trends -- particularly related to convention attendance, visitor volume, and room rates on the Las Vegas Strip -- will drive modest improvement in the Las Vegas locals market over the next few years. However, we do not expect a return to meaningful growth or to previously generated levels of revenue and EBITDA in the locals market over at least the next few years. We expect a modest single-digit decline across Cannery's Las Vegas locals properties, which incorporates the declines experienced at Cannery and Rampart in the first quarter and our expectation that the market will stabilize this year," S&P said in its report.

"Additionally, we believe Eastside Cannery will continue its slow ramp up in operating performance. Our rating also incorporates the expectation that Cannery will not continue to manage Rampart Casino following the end of its lease in 2012. We believe, however, that improvement in performance at the company's other properties in 2012 will offset the loss of cash flow from Rampart," S&P’s report said.

Cannery is privately held and doesn’t disclose financial results.

But a company associated with Cannery investor Oaktree Capital Management L.P. reported that in 2010, Cannery Casino Resorts lost $15.1 million on revenue of $513.7 million vs. a loss in 2009 of $23.2 million on revenue of $509.4 million.

Cannery ended the year with debt and other long-term liabilities of $492 million, a regulatory filing said.

The Oaktree affiliate said that in the first quarter, Cannery lost about $945,000 on revenue of $132.8 million, an improvement from 2010’s first quarter when it lost $4.8 million on revenue of $121.4 million.

The affiliate noted the owner of the JW Marriott Las Vegas Resort & Spa, which has been leasing the Rampart Casino to Cannery under a lease expiring March 31, 2012, has announced plans to internally manage the casino.

"Accordingly, Cannery Casino Resort’ management is currently evaluating transition plans for the likely conclusion of Cannery Casino Resorts’ operations related to Rampart at the end of the lease term," the Oaktree affiliate said in its filing.

Earlier this month, Herbst Gaming LLC said it signed a casino consulting and noncompete agreement with the hotel owner.

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  1. The East Side Cannery rooms were sold at 29.95 usd / night when it opened, midweek. The rooms are nice and were absolutely new when I visited the hotel/casino. It was great staying there at such an incredibly low rate. The not-sound-proof walls were something I had to tolerate but the price was ok so I stayed there and even extended my stay for additional days.
    Then I noticed that a lot of neighborhood families were crowding the pool , people that were not actually Hotel guests.
    Management obviously took hand on the matter, finally, by locking up the pool and requesting wrestbands for all customers, obviously aware of the fact that people would simply hand over room keys that allowed basically everybody visiting the pool.
    Then I spoke to a lady who told me she had received free hotel stays at the property and therefore stayed there. She never gambles, but enjoys the free rooms and the free buffet she was given, too. I was amazed, because she told me she lives in Vegas and once in a while takes a vacation within Vegas and just enjoys the free rooms.
    I wonder how come we international visitors never get such offers? We come to Vegas, we gamble, we have our players card inserted in the videopoker machines, but still, all these super offers are being given lavishly to the local crowd, that, at some degreee , only collects the freebies without actually giving any action.
    The East Side Cannery rooms are now at 39.95 and up, plus tax. And that's the room rate you can get at most other places in Vegas. Therefore, it's no longer interesting visiting the Cannery East. I think that's what many other out-of-towners also noticed.

    From Switzerland