Staff Blog
The Trouble With Foxwoods
What a mess.
The Daily News' Chris Brennan reports today that Foxwoods casino, which is going before the Pennsylvania gaming Control Board tomorrow to ask for an extension of its license, will likely be told to return to its first intended location on the South Philly waterfront – instead of its recent (and city-approved) plan to place a casino in the former Strawbridge & Clothier store at Market & 8th Street.
And that could be a big problem for Foxwoods. They conceded the waterfront location only after staunch opposition from not only neighbors but the likes of Mayor Nutter, Councilman Frank DiCicco, and former-State Senator Vince Fumo.
Nutter and DiCicco changed their tune when Foxwoods announced it intended to relocate to the Chinatown area; what will they be singing now?
Meanwhile, Foxwoods – or, rather, the Mashantucket Pequot Tribal Nation, which owns controlling shares of the Connecticut Foxwoods casino – appears to be going bankrupt.
In a rather under-stated piece, the AP reports on Philly.com merely that "Foxwoods investor to restructure debt."
The Connecticut-based The Day, which first broke the story, paints a somewhat more colorful picture of the tribe's financial woes:
On the brink of default, the Mashantucket Pequots are seeking to restructure $2.3 billion worth of debt, a senior adviser to the tribe said in interviews this week.
The debt is $1 billion more than the tribe's Foxwoods Resort Casino - North America's largest casino and once the world's most profitable - can sustain, the adviser said.
While Foxwoods representatives claim that a default – should one happen – wouldn't affect Foxwoods' plans in Philadelphia, it's hard to believe that.
As Inquirer "Philly Deal$" columnist Joseph DiStephano puts it, "it won't make it any easier for [Foxwoods] to borrow."
How could the country's largest and once most-profitable casino be in this much trouble?I called Professor Earl Grinols of Baylor University, an economist and expert on the gaming industry, to see what he thought.
"I think it's probably just mismanagement," he said. As the casino lost its regional monopoly on legal slot gambling, Grinols said, "They should have been able to project future revenues and accommodate."
Tough luck for them – and, perhaps, for Philadelphia and Pennsylvania if we make the same mistake of believing overly-optimistic, skewed, or just plain phony revenue projections offered up by this troubled company and the other casinos operating and getting ready to operate in our state.
Because legalizing slots casinos means that casino revenue projections become state and county and city revenue projections.
And we know already what it looks like when those turn up a billion short.
It is actually not such a large mess. Connecticut should change their state laws and legalize casino operations for US and Indian reservations. and then put Foxwoods up for sale to the highest bidder. Overnight the debt would go up in value. Foxwoods has tremendous cash flow. EBITDA is huge, and no one really knows what their tables actually make for they are not monitored properly. It would be best for an audit of their tables for a three month period to determine their approximate cash flow. 25% of their cash flow from slots goes to the state of Connecticut. Since Foxwoods was mismanaged, now is the time for the state of Connecticut to squeeze a little harder not less, and get a 35% share of slot revenue or place a $ 50 entrance fee for all consumers of American Indian casino’s in addition to the 25% slot revenue in the state of Connecticut. They have no real competition and they still couldn’t handle their profits. US banks are not gong to sit by and restructure debt to a mismanaged casino. Just legalize casino’s for US operations and the banks can take over for pennies on the dollar and then sell their equity shares to the highest bidder on Wall Street. It is now a game of Poker. Stockholders should not let their management restructure without getting sizable equity.