MTR Gaming Aims to Reduce Debt
MTR Gaming Inc. has defined as core assets its two Thoroughbred racinos and an Ohio harness track, and will examine sale possibilities of all other properties to reduce debt and raise shareholder value, the company said July 30.
During an earnings conference call discussing a second quarter where the company posted a $2.31 million loss against an 11% increase in revenue, MTR Gaming termed as strategic core assets its flagship Mountaineer Casino, Racetrack & Resort in West Virginia; Presque Isle Downs & Casino in Pennsylvania; and Scioto Downs, a harness track in Columbus, Ohio.
Other properties, including undeveloped land and harness racinos interests in Michigan and Minnesota, are possibly up for sale as the company looks to drive down company debt, which includes borrowings on a senior credit facility of $125 million.
“We are look at the best way to maximize our shareholder value is debt reduction,” David R. Hughes, MTR Gaming’s chief financial officer, told analysts during the conference call. “All available cash will be focused to bring down debt.”
“Everything that is not a core asset is a non-core asset, and is being reviewed,” said MTR Gaming president and chief executive officer Ted Arneault. “We are sitting in a land-rich position.”
The company earlier this year sold its two Las Vegas casinos -- Binion's Gambling Hall & Hotel and the Ramada Inn and Speedway Casino – for $27.6 million and $13.4 million, respectively, with a possibility of realizing an additional $4.8 million future payments from the sales. Proceeds from those sales were used to pay down on debt, the company said.
“We are in a transitional state, and in a tough market, and looking at increasing numbers all the way around,” Arneault said.
For the second quarter, company-wide net revenues increased to $126.9 million, up 11% from $114.6 million in the same period of 2007. Included was an 11% increase in revenues at the Mountaineer racino, with $11.4 million in combined poker and table games revenue offsetting a $5.7-million decrease in slots play. Presque Isle Downs’ net revenues also increased 11% to $48.9 million.
Arneault said both the management team and board of directors are in agreement with the current strategy of the company, including director Jeffrey P. Jacobs, whose family and their affiliate businesses – one of which privately owns Colonial Downs -- control nearly 16% of all company stock.
“Everyone is singing from the same hymnal,” Arneault said. “Everyone, right now, is intent on getting margins up, and using sales to get debt down.”
In June, Jacobs indicated he wanted to increase the family's share in MTR Gaming, tendering an offer to purchase up to $5 million of Arneault’s personal stock holdings by next January, according to a filing with the U.S. Securities and Exchange Commission. Jacobs Entertainment Inc., which owns Colonial Downs and five other gaming facilities, in March said it was shifting its focus towards facilities that feature multiple forms of gaming. The company put Colonial Downs on the sales market in January.
Arneault said plans for his exit from the company by no later than the end of the year were on schedule. “No extensions will be needed,” he said.
MTR Gaming’s stock price, which traded as high as the $13-range in the last year, rose 1.5% to $4.01 in July 30 morning trading.
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