Additional Gaming Bankruptcies Imminent, Says Grant Thornton LLP

NEW YORK, Oct. 30 /PRNewswire/ -- As gaming companies face declining revenues and margins, aggressive steps must be taken to restructure debt and reduce costs, according to distress experts at Grant Thornton LLP's Corporate Advisory and Restructuring Services (CARS) practice. Bankruptcy is more likely for those with low interest coverage ratios, low levels of cash and limited unencumbered assets to address looming debt maturities.

Net revenues at gaming companies during the last year declined because foot traffic has been weak and patrons have reallocated their entertainment dollars. The decline in leisure travel also has pressured hotel room rates, which had a negative impact on hotel operations. This, coupled with an overall decrease in consumer spending that's not expected to let up in the short term, is causing gaming companies of all sizes to struggle. Las Vegas, considered a destination market, is being hit harder than regional markets because people are staying closer to home.

"Gaming companies that are currently constructing new facilities have an additional capex burden draining needed cash, whereas those with planned additions in the future face less immediate cash uses and lower financial risk," said Grant Thornton CARS Principal Jim Peko.

Gaming restructurings are similar to other industries but have distinct complexities and unique aspects, such as 24/7 staffing requirements, loyalty programs and multiple product offerings including gaming, restaurant, entertainment, retail and hotel operations.

To restructure, companies must navigate the industry's financial, operational and regulatory environments. Peko believes the gaming industry faces many challenges when it comes to turning around a company's financial performance--and changes must go deeper than cost reduction. Balance sheet issues must be addressed and loan covenants must be reset. The regulatory process can impact the sales process and potentially limit the universe of buyers as a result of strict licensing requirements.

"Cash is king in all distressed situations," said Peko. "However, in a casino restructuring, not only must you focus on cash but you need to control cards and chips as well. Managing the 'three Cs', and having the appropriate level of surveillance, are critical to ongoing operations."

Grant Thornton believes casinos best positioned to avoid bankruptcy are those with diversified locations, large cash positions, higher interest coverage ratios, an ability to refinance or meet debt maturities and an ability to maximize cash flow at lower revenue levels.

About Grant Thornton LLP Corporate Advisory and Restructuring Services
Grant Thornton LLP's Corporate Advisory and Restructuring Services (CARS) Practice launched its U.S. practice in 2007 and has grown to include more than 100 professionals in 12 offices. The CARS team works with underperforming and transitional companies and their stakeholders. They quickly evaluate the financial and operational issues adversely affecting performance, assess the strategic alternatives and develop and execute comprehensive plans to address these challenges. Grant Thornton's advisory team delivers in-depth advice and balanced insight through a comprehensive, holistic approach. www.GrantThornton.com.