Gaming Industry Credit Quality Stabilizing Despite Challenges

The US gaming industry may have hit bottom, according to Standard & Poor’s:

The U.S. gaming industry continues to be affected by the ongoing economic downturn, and while the worst of the year-over-year gaming revenue declines appear to be over for many of the riverboat markets, the country’s largest gaming markets, Las Vegas and Atlantic City, continue to experience significant difficulties.

Still, ratings are gradually stabilizing, as we believe that the future operating assumptions underlying our gaming company ratings are sufficiently conservative to limit significant further downside pressure on ratings.

This is not to say there will not be any additional downgrades, as there are many company-specific issues that we are monitoring, including potential covenant violations and near-term refinancing risk.

While ratings appear to be stabilizing, we do not expect the operating environment for gaming companies to return to robust growth any time soon. We expect that the bottom will be a period of choppy performance where gaming revenue in various markets may grow by a few percentage points one month, only to decline by a few in the next.

However, as stated earlier, we expect the largest two gaming markets in the U.S. – Las Vegas and Atlantic City –to continue to face difficulties in the months ahead. Las Vegas will experience a sharp increase in supply with the opening of City Center in the fourth quarter, further pressuring already low room rates, although the jobs created by the opening may benefit the locals market. As for Atlantic City, new and improved facilities in Pennsylvania will likely continue to impair the market through the remainder of 2009.

For details see:
Industry Report Card: Times Are Still Tough For U.S. Gaming, Lodging, And Leisure Companies, But Credit Quality May Be Turning A Corner

and Gaming, Lodging, And Leisure Companies, Strongest To Weakest.

Comments

[User 406719:]

The gaming industry will remain weak thru the summer months the slowest time of the year especially in Las Vegas due to the extreme heat. Gaming should rise starting in October led by Wynn the class of the industry.

Jul 08 02:30 AM