Analysts say outlook improving for Cannery Casino Resorts
Sam Morris / Las Vegas Sun
31 May 2011
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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