WALL STREET EYES THE ALADDIN

Friday, November 17, 2000

By Dave Berns
lasvegas.com Gaming Wire

  The Aladdin's parent company is set to hold a Monday conference call 
with investors to discuss the company's recently announced 
third-quarter earnings, which raised questions about the financial 
well-being of the Strip's newest megaresort.
   Meantime, Wall Street analysts have downplayed the Aladdin's poor 
results, which were detailed in a Tuesday filing with the federal 
Securities and Exchange Commission.
   "The poor results were somewhat expected given previous comments by 
management that the property's initial ramp-up period was proving to 
be difficult," wrote Bear, Stearns & Co. financial analyst Jason Ader 
in a Friday report.

   The Aladdin opened Aug. 18, and during the 44-day operating period 
ended Sept. 30 the megaresort reported negative cash flow of $3.2 
million on net revenues of $36.8 million.
   The $1.4 billion property reported a net loss of $40.2 million and 
gross revenues of $40.6 million for the third quarter.
   The Aladdin's 135,000-square-foot casino generated revenue of $19.4 
million and its 2,567 hotel rooms saw an occupancy rate of 77 percent 
at an average nightly rate of $130.
   "If everything goes well they have enough resources," said a Wall 
Street source familiar with the Aladdin's operations. "It's going to 
be tight, but they're saying they have enough money to make their 
payments if they have normal, average, regular operations."
   Although privately owned primarily by Aladdin Gaming and London 
Clubs PLC, the company filed the SEC report because it was partially 
financed with public debt.

   Aladdin bonds, which had been trading in the high 60s when the 
property opened, have dipped into the 50s in recent weeks amid 
investor doubts about the project's early results.
    Park Place Entertainment, which owns the neighboring Paris 
hotel-casino, holds about one-third of the Aladdin bonds, sparking 
speculation that the gaming giant could transform those bonds into an 
ownership position in the Aladdin if the property's financial 
troubles persist.
   Paine Webber financial analyst Robin Farley wrote after the SEC 
filing that the Strip resort does not appear to have stimulated 
demand as have other recently opened megaresorts.
   "It has always been the case in Las Vegas that if new room 
inventory doesn't bring increased demand, it means more pressure on 
other operators to share a smaller pie," Farley wrote.
   She noted that a 9.4 percent decline in the amount of money Strip 
casinos won from gamblers in September was particularly disturbing in 
light of the Aladdin opening.

   Two major gauges of success loom on the horizon for the Aladdin, 
the Thanksgiving weekend and New Year's Eve.
   A third combination, the recently completed Comdex trade show and 
last weekend's Lennox Lewis-David Tua heavyweight championship fight 
generated what Aladdin executives have characterized as "OK" results, 
the anonymity-seeking Wall Street source said.
   As of Nov. 9 the company had unrestricted funds available of $10.3 
million leaving it with little leeway in terms of liquidity, Ader 
wrote.
   During the next 12 months, the company owes $55 million in 
principal and interest, according to the terms of its bank debt, with 
$21.7 million owed by the end of the first quarter.
   Aladdin Gaming is attempting to receive additional funding from a 
variety of sources, according to the filing.
   The company recently made a $5 million payment to its bank creditors.
   "I'm confident you don't let a billion-dollar project fail for $5 
million," the anonymous source said.

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