Empire Resorts avoids bankruptcy
New York-based gaming company Empire Resorts, Inc. announced on Monday that it has sold the outstanding equity in the firm to Kien Huat Realty III Limited and Genting Malaysia Berhad.
The two Malaysian companies already owned 86 percent of Empire Resorts. The deal was for $9.74 in cash per share, a 15 percent premium above Empire’s closing price on Friday.
From its opening through June of this year, Resorts World has lost $211.5 million.
The transaction was prompted largely by the financial failure of Empire’s upstate New York casino, Resorts World Catskills. Opened in February 2018 in Kiamesha Lake, the $1.2 billion property has bled cash. From its opening through June of this year, Resorts World has lost $211.5 million.
In a recent SEC filing, the company noted that it might have to file for Chapter 11 bankruptcy. The deal with Kien Huat and Genting was done in order to avoid that step.
Too much competition fracturing market
The New York Times reported last week that Resorts World is not alone in its struggles. All four resort style casinos in upstate New York have fallen short of revenue projections. The Times said that a major reason for the trouble is that the gambling market has become saturated. There are also five tribal casinos in the state, along with a number of racinos.
“In the early days, it was build it and they will come, and that worked for a long time,” Alan Woinski, a gambling industry analyst and consultant, told The Times. “That was great when you only had a casino in every other state. Now it’s like a war.”
And it is not just competition within New York’s borders. Neighboring states such as Pennsylvania and Massachusetts have grown their gambling industries. Potential customers have enough options that they don’t need to flock to one casino.
Communities, not casinos, seeing financial benefit
As is always the case when states look to expand gambling, the benefits of jobs and tax revenue were touted. The construction jobs, though, were temporary. And as The Times reports, many of the full-time casino positions are low paying, with a mean salary of just $35,000 per year.
Rush Street CEO Greg Carlin told The New York Times that it was a double whammy for Rivers Casino, that “revenue is below what we originally expected and our costs are higher, and we didn’t appreciate the impact that different slot rates would have on our business.”
He also said that Rivers has been a benefit to the state and local community in terms of tax revenue and jobs, “But it has not been a success from an ownership or an investment standpoint.”
Sale pulls Resorts World back from brink
In addition to losing tens of millions of dollars per quarter, Empire Resorts also has more than $400 million in debt. The sale to its Malaysian shareholders will help with this, as well.
In a press release to announce the deal, independent director of Empire Resorts Keith Horn said, “Importantly, Kien Huat has agreed to provide incremental credit support to Empire Resorts, which will enable the Company to meet its debt obligations as we continue to execute on our business strategy.”
Genting Americas president Ed Farrell told the Poughkeepsie Journal that it should be able to turn things around:
We can bring synergies to both projects.”
He added: “By just operating at a higher scale, we’re going to be able to put the cost structure in a way that Resorts World Catskills can turn to black and we can make money going forward.”
Genting owns a number of Resorts World-branded properties around the world, including locations in New York City and Las Vegas. It also owns, among others, Crockfords Casino and The Colony Club in the United Kingdom.