Vol. 7 • No. 19 • May 25, 2009

Vol. 7 • No. 19 • May 25, 2009

GGB NEWS May 25, 2009

COVER STORY:

New Jersey Regulators Find MGM Macau Partner ‘Unsuitable’

The New Jersey Division of Gaming Enforcement submits a report to the state Casino Control Commission that calls for the denial of approval for a partnership between Pansy Ho (l.) and MGM Mirage for the MGM Grand Macau and other ventures.

 

FEATURED STORIES:

WEEKLY FEATURE: A Call To Arms

The East Coast Gaming Congress focuses on Atlantic City, and the challenges the city faces in the near term to meet increasing competition, while offering cautious optimism on the industry at large.

 

Ukraine Casinos Go Dark

The parliament of Ukraine has voted to ban all gaming except lotteries and ordered the administration to draw up a plan to remove all gaming from the cities to not yet designated gambling zones, including the Casino Chance in Lviv, Ukraine.

 

Gaming Reform Eyed In Bahamas

Reform chairman and former PM say Bahamas could reap million if it “regularizes” gaming industry and gives all Bahamians access to casinos, including the spectacular Atlantis on Paradise Island.

 

Senecas, Rotate Black “Ready To Go” On $1.3B Catskills Resort

Despite contradictory reports about available credit, Seneca Chairman Barry Snyder says the new resort will help revitalize New York’s Catskill Mountains as a tourist mecca.

 

MGM Mirage Completes Restructuring

Stock sale and private notes raise $2.6 billion, but company might not be in clear yet, as Kirk Kerkorian yields majority ownership.

 

ALSO:

FANTINI’S FINANCE: Conventional Wisdom

Risk Taking Conference Slated For This Week In Lake Tahoe

New Jersey Regulators Find MGM Macau Partner ‘Unsuitable’

By Staff   Fri, May 22, 2009

New Jersey Regulators Find MGM Macau Partner ‘Unsuitable’ MGM could be forced to sell interest in Macau or Atlantic City


The New Jersey Division of Gaming Enforcement has sent a report to the state Casino Control Commission today recommending that the approval requested by MGM Mirage of a partnership with Pansy Ho, the daughter of Macau gaming magnate, Stanley Ho, be denied. Pansy Ho and MGM Mirage have partnered on the MGM Grand Macau, a $1 billion casino resort in the Chinese gambling enclave, which opened in 2007. In gaming jurisdictions where it is licensed, MGM Mirage was required to obtain approval for the partnership. Four states—Michigan, Illinois, Nevada and Mississippi—have already granted their OK, but New Jersey had spent many months doing a complete investigation.

Details of the report were issued because it has just been delivered to the CCC, but MGM Mirage issued an SEC filing detailing its understanding of the document.

“On May 18, 2009, the DGE (Division of Gaming Enforcement) issued a report to the New Jersey Commission on its investigation. While the report itself is confidential, at the conclusion of the report, the DGE recommended, among other things, that: (i) the company’s Macau joint venture partner be found to be unsuitable; (ii) the company be directed to disengage itself from any business association with its Macau joint venture partner; (iii) the company’s due diligence/compliance efforts be found to be deficient; and (iv) the New Jersey Commission hold a hearing to address the report.”

“However, the report is merely a recommendation and is not binding on the New Jersey Commission, which has sole responsibility and authority for deciding all regulatory and licensing matters. The New Jersey Commission has not yet taken any action with respect to the report, including whether or when a hearing should be scheduled," the company said.

Casino Control Commission Chairwoman Linda Kassekert told GGB News that she and her staff have not yet read the report, since it had just been delivered, but was “likely” to hold hearings on its findings.

The contention of the DGE report is likely to be an ongoing connection between Pansy Ho and her father, Stanley, who held a monopoly on gaming in Macau for many years. When Portugal turned over its former territory to China in 1999, the Chinese government opened up gaming to international companies. Three concessions were granted at that time: Stanley Ho’s SJM, Wynn Resorts and Galaxy Entertainment. The MGM Macau operates under a sub-concession granted to Pansy Ho from SJM.

In a statement released following the report by Ms. Ho, she said, “I and my advisers will need time to read and consider the contents of the report and decide how best to respond to it.”

In most jurisdictions, Stanley Ho would not be able to be licensed because of real connections to the Triads, Chinese organized crime groups. Pansy, and her sister and business associate, Daisy, have admitted to receiving some of their funding from Stanley, but deny he wields any influence over them or their business operations.

Some of the consequences for MGM Mirage could be giving up its license in New Jersey should it decide to continue its relationship with Ho in Macau. MGM owns 50 percent of the Borgata in Atlantic City, which is operated by partner Boyd Gaming. The company also owns 50 percent of MGM Grand Macau, which it operates for the partnership. The company could choose to relinquish the Macau investment and retain its New Jersey license.

MGM Mirage had announced a $5 billion MGM Grand Atlantic City and had begun the planning and design process until the declining economy and sinking revenue in Atlantic City caused a halt to the process. The company insists that the project is merely on hold and it will resume design and construction once the economy turns around. But should it decided to focus on Macau rather than Atlantic City, the project would be effectively dead.

In Nevada, just prior to the Gaming Control Board’s decision to approve the relationship between Pansy Ho and MGM, the company announced a huge development in Jean, about 30 miles south of Las Vegas near the proposed international airport. The project included a new casino resort and thousands of homes. Several months later, the project was quietly dropped, citing the bad economy. Company officials deny there was any link between the two events.

Dennis Neilander, chairman of the Nevada Gaming Control Board, told the Las Vegas Review Journal that New Jersey and Nevada have different laws and interpretations of laws when considering the suitability of business partners. He assumes that New Jersey simply weighed the facts differently than did his agency.

“If there was evidence not provided to us, then there would be a concern,” Neilander told the newspaper. “Otherwise, it would seem that the Division of Gaming Enforcement came to a conclusion using the same facts but applying New Jersey law.”

Meanwhile, Crown Casinos, which is in business with Lawrence Ho, Stanley’s son, downplayed any impact of the New Jersey decision on the Melco Crown partnership.

"It has no effect on us, our relationship with Lawrence or Melco … the Lawrence-Melco relationship has been approved in Australia and in Nevada some time ago," said Crown's head of investor relations and director of international business development, Anthony Klok, referring to Melco Crown’s potential purchase of the Cannery Resorts, which got the OK in Nevada.

When the approval of the Pennsylvania Gaming Control Board was sought, however, the deal broke down and the license application was withdrawn.

GOODS & SERVICES,

Risk Taking Conference Slated For This Week In Lake Tahoe

Fri, May 22, 2009

Risk Taking Conference Slated For This Week In Lake Tahoe On May 25, the most noteworthy gathering of gambling scholars, researchers and academics ever assembled will take place at Harrah’s Lake Tahoe Resort and Casino at Stateline, Nevada, to analyze, discuss, and debate a wide variety of scientific, policy, business, and aesthetic issues concerning gambling. Altogether, nearly 180 academic and professional papers will be presented over the five days of the conference, divided among 80 sessions. Participants hail from every inhabited continent, and will address many issues that affect, or are affected by, the growing presence of legal commercial gaming in jurisdictions throughout the world.

This year marks the 35th anniversary of the first National Conference on Gambling and Risk Taking, which was held in Las Vegas in June 1974. Over that span, casino gaming has grown from a pariah industry outlawed throughout the United States except Nevada, and almost everywhere else in the world, to one that has become ubiquitous. As of 2009, legal commercial gaming generates revenues of about a quarter of a trillion dollars globally, and only a handful of nations and states still prohibit the activity.

Among the topics that will be dealt with at this conference will be:

• Political and Economic Dimensions of Gaming Industries
• Gambling And The Law
• Estimating Demand for Gaming Markets
• Managing a Casino License Bid Process
• Casino Marketing and Loyalty Programs
• Empirical Casino Operations Management Research
• Smoking Bans and Casinos
• The Life of the Internet Gambler
• The Image of Gambling Towns
• Analyzing Poker and Blackjack
• Optimizing Returns in Parimutuel and Sports Wagering
• Cultural Perspectives on Gambling and Gamblers
• Responsible Gambling Policies and Harm Minimization
• Gambling With the Global Economy: Seeing the Financial Sector as a Casino
• Links between gambling and the current economic crisis
• Prediction Markets
• The National Gambling Impact Study Commission's Final Report Ten Years Later
• The National Indian Regulatory Act 20 Years Later
• The Future of the Modern Casino Corporation
• Applications of Technology in Addressing Problem Gambling
• Historic Perspectives on Gaming Industries

Keynote speakers and their topics are:

• Eugene Christiansen, Christiansen Capital Advisors, New York: “The Problem Isn’t Gambling—The Problem is Debt”
• Aaron Brown, AQR Capital Management, Connecticut: “The Year of Betting Dangerously”
• Professor Robert Ladouceur, Laval University (Quebec): “Controlled Gambling instead of Abstinence for Problem Gamblers”
• Professor Don Ross, University of Cape Town: “The Neuro-Economics of Gambling”
• Don Feeney, Minnesota Lottery: “Gambling in American Traditional and Popular Music”
• William R. Eadington, University of Nevada, Reno: “Parallels Between the Global Economic Crisis, Gamblers, and Gaming Industries”

Other distinguished researchers who will be participating include: Professor I. Nelson Rose, Whittier Law School; Professor Peter Collins, National Responsible Gambling Programme, South Africa; Professor Bo Bernhard, University of Nevada Las Vegas; Anthony Jennens, GamCare, United Kingdom; Professor Alex Blaszczynski, University of Sydney; Professor Stewart Ethier, University of Utah; Professor Alicia Barber, University of Nevada, Reno; Ricardo Siu, University of Macau; and many more.

Jurisdictions to be discussed at the conference cover the world, from Nevada to China to South Africa to Australia to Slovenia to Kansas. Gaming industries which will be analyzed include casinos, lotteries, racing, sports wagering, internet gambling, slot machine manufacturing, and Wall Street.

For further information on the Conference, call 775-784-1442, or visit www.unr.edu/gaming.

GOODS & SERVICES,

IGT Installs Limited Server-Based Setup At Barona

Fri, May 22, 2009

International Game Technology is testing a microcosm of the networked slot floor of the future at the Barona Resort and Casino in San Diego, California. The slot-maker last week completed installation of “sbX Tier One,” a limited-scale server-based slot system featuring 100 game themes that can be interchanged and downloaded remotely on a total of 49 cabinets.

The installation, a prelude to several commercial installations of the small-scale networked system anticipated this year, allows the player to switch from three-reel to four-reel to five-reel games, and from slots to video poker games, all on the same machine, thanks to “REELdepth,” the exclusive 3D technology that mimics reel-spinning slot presentations and 3D bonus events using overlapping video screens.

Barona has more than 100 game themes to choose from in the IGT Game Library, which is included in the Tier One Package.

“We look to this evolution of the server-based gaming solution as another step in our continued testing partnership with IGT,” said Chuck Hickey, vice president of slot operations at Barona. “We hope that the operational and regulatory input we have shared with IGT is as valuable to them as the chance to be on the forefront of this long-awaited next phase of the gaming floor of the future has been to us.”

“Everyone involved with these installations is excited to be at the leading edge with this technology,” added Javier Saenz, vice president of network systems product management and marketing for IGT. “And with the recent submittal of our integrated property-wide solution to the Nevada Gaming Control Board, we are demonstrating our leadership and progress in bringing server-based gaming to market. No other manufacturer has reached this level of success with server-based initiatives.”

GOODS & SERVICES,

Paddy Power Enters Australian Market

Fri, May 22, 2009

Irish bookmaker Paddy Power announced last week that it had acquired a 51 percent stake in one of Australian largest corporate bookmakers, Sportsbet.

Paddy Power will initially pay US$48.5 million to acquire the interest in Sportsbet, followed by a cash payment of US$45.8 million from the company's existing cash reserves and the issue of 100,000 Paddy Power shares to Sportsbet shareholders.

An additional cash consideration of US$10 million will become payable to Sportsbet shareholders in early 2010 if Sportsbet's EBITDA during 2009—before transaction and restructuring costs—exceeds US$16.5 million. Sportsbet reported EBITDA of $7.9 million last year on turnover of $878 million. The company has forecast EBITDA of $14.6 million for the year ending June 30 2009.

Under the terms of the acquisition, if Sportsbet’s EBITDA for any of the years 2010, 2011 or 2012 is less than $11 million, Paddy Power will have the right to take equity from Sportsbet’s existing shareholders on a proportionate basis to the shortfall in profitability.

In addition, Paddy Power has a call option, exercisable in either 2012 or 2013, to acquire all of the outstanding shares in Sportsbet that it does not own, with the exercise price to be determined based on an EBITDA multiple of 5 to 7 times, depending on the level of EBITDA.

In the event that Paddy Power elects not to exercise the call option, the minority shareholders in Sportsbet will have the option to acquire Paddy Power’s shareholding.

Commenting on the acquisition, Patrick Kennedy, CEO of Paddy Power, said, "This business is an excellent fit with Paddy Power. Sportsbet has a strong, well run business together with plenty of potential to build on its market position in Australia.

"The acquisition adds a new dimension to our business portfolio to which we can bring trading, risk management and marketing expertise honed in Ireland and the U.K. to complement Sportsbet’s existing skills and experience."

GOODS & SERVICES,

Cirsa Chooses FutureLogic

Fri, May 22, 2009

Leading thermal printer supplier FutureLogic, Inc. announced that it has been named preferred global technology partner by Cirsa Gaming Corporation, the Spanish operator of 150 casinos and bingo halls that also is the manufacturer of slot machines bearing the Unidesa brand.

According to the agreement, FutureLogic’s GEN2 Universal printers will now be specified as the preferred printer in Cirsa’s operations around the world, and on all of Unidesa’s current and new TITO gaming platforms.

“FutureLogic’s reputation for performance and reliability and its outstanding support for our international expansion make them the obvious choice as the technology partner for Cirsa’s thermal ticket applications, both now and in the future,” said Josep Casas, global sourcing director for Cirsa.

“We chose FutureLogic after evaluating our options and listening to the market,” said Antoni Mengual, Cirsa’s R&D gaming director. “FutureLogic’s position as one of the leading companies in gaming printer technology, their preferred status with casinos throughout the world, and their focus on customer satisfaction are precisely what we need from a technology partner.”

“We are pleased to be selected as a strategic partner by such a renowned name in the gaming industry,” said John Edmunds, vice president of FutureLogic International. “It is testament to all the efforts of our design engineers and support teams around the world that Cirsa and Unidesa have chosen FutureLogic for its leading technology and timely, knowledgeable support.”

GOODS & SERVICES,

IGT’s MultiPLAY Receives Widespread Approvals

Fri, May 22, 2009

Leading slot manufacturer International Game Technology announced that its new “MultiPLAY” video slot has received rapid approval for release in 38 different U.S. jurisdictions, including Nevada, California and Oklahoma.

The new format places four individual reel sets on one screen. All four video slot games are played at once, with bonus events triggered on any of the screens—as long as the player wagers enough to cover the paylines on all four games.

“IGT really hit a home run with this game,” said Mike Laubach, director of slot operations at the Orleans in Las Vegas. “This game has received phenomenal response by players. Out of 2,800 games, this game is the best one on our floor. It’s off the charts.”

Results were similar at Cache Creek casino in California.
MultiPLAY is also a top-performer at Cache Creek in California “The games are performing well above house average, and appeal to a wide range of players, from penny to—surprisingly—high limit,” said Cache Creek VP of Slot Operations Russel Kinney. “Many guests have stated the games are tremendously fun and want to know when we’re getting more themes.”

In addition to playing up to four video slot games on the same machine at the same time, players can hit four progressives sequentially or even hit four bonuses on one spin. Bonus rounds fill the base game screen, and play one after the other. “It’s the multi-hand video poker experience now in a multi-game video slot for the very first time,” said Ryan Griffin, IGT product manager for standard products. “And the flexibility, superior design and options provided by MultiPLAY set it apart from the competition.”