|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
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
results, which were detailed in a Tuesday filing with the federal
Securities and Exchange Commission.
"The poor results were somewhat expected given previous
management that the property's initial ramp-up period was proving to
be difficult," wrote Bear, Stearns & Co. financial analyst Jason
in a Friday report.
The Aladdin opened Aug. 18, and during the 44-day operating
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
gross revenues of $40.6 million for the third quarter.
The Aladdin's 135,000-square-foot casino generated revenue
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
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
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
hotel-casino, holds about one-third of the Aladdin bonds, sparking
speculation that the gaming giant could transform those bonds into
ownership position in the Aladdin if the property's financial
Paine Webber financial analyst Robin Farley wrote after
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
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
casinos won from gamblers in September was particularly disturbing
light of the Aladdin opening.
Two major gauges of success loom on the horizon for the
the Thanksgiving weekend and New Year's Eve.
A third combination, the recently completed Comdex trade
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
million leaving it with little leeway in terms of liquidity, Ader
During the next 12 months, the company owes $55 million
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
variety of sources, according to the filing.
The company recently made a $5 million payment to its
"I'm confident you don't let a billion-dollar project
fail for $5
million," the anonymous source said.
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