TEXT-Fitch: casinos recovering From Sandy, effects may linger

Thu Nov 1, 2012 11:54am EDT

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Nov 1 - Gaming operators in Atlantic City, NJ, and across the mid-Atlantic
region appear poised to re-open properties affected by Hurricane Sandy
relatively quickly, limiting the storms impact on cash flow. However, Fitch
believes longer term effects on physical infrastructure and consumer sentiment
in New Jersey and surrounding states could have a material impact on
fourth-quarter gaming demand.

Despite major damage suffered on the Atlantic City Boardwalk, industry officials
have indicated that gaming properties have not experienced the type of physical
damage that would prevent their re-opening over the next few days. Gaming
companies will likely recover some of the lost cash flow from business
interruption and property damage insurance.

The bigger question for the industry remains the status of roadways and other
infrastructure in the Atlantic City and feeder areas, which may limit the
ability of casino employees and customers to get to Atlantic City's 12 gaming
properties easily. We also believe that regular customers in the region may be
preoccupied for some time with storm recovery, potentially lowering visitation
volumes for a few weeks.

Relative to Hurricane Irene, which hit the region on an August weekend, revenue
and EBITDA losses from Sandy will be mitigated by the fact that disruption has
occurred during a low-demand, midweek period. However, the post-storm effects
could be more severe, resulting in material pressure on fourth-quarter operating
results.

Caesars Entertainment (Caesars), which has four properties affected by Sandy,
indicated on its earnings call yesterday that it expected to re-open its
Atlantic City properties shortly, pending government approvals.

Trump Entertainment, Revel Entertainment, and the Marina District Finance Co.
(owner of The Borgata, a joint venture between MGM and Boyd Resorts) generate
all of their cash flow from Atlantic City. Caesars also has significant exposure
to the market, with approximately 15% of consolidated EBITDA coming from that
market.

The above article originally appeared as a post on the Fitch Wire credit market
commentary page. The original article can be accessed at www.fitchratings.com.
All opinions expressed are those of Fitch Ratings.
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