NEW YORK (Reuters) - Casino bankruptcies are likely in the next few years as too many U.S. locations fight for too few gamblers, a top restructuring investment banker said on Thursday.
“The gaming industry in general is over-casinoed,” said Kenneth Buckfire, chief executive and co-founder of investment adviser Miller Buckfire. “You’ll see consolidation and shakeout across the country.”
Billionaire investor Wilbur Ross said New Jersey’s Atlantic City was facing an “extremely tough period” since it is not considered either a “resort” or “family” destination and is dependent upon car and bus traffic from local areas. That makes it vulnerable to competing casinos in New York and Pennsylvania, he said.
Ross and Buckfire spoke to reporters and editors at the Reuters Restructuring Summit in New York on Thursday.
Gaming commissions’ tight regulations will stymie some who might want to take over troubled casinos, said Buckfire.
“The basic problem is making sure you have the gaming commission on your side,” he said. “Not everyone is acceptable to the gaming commission as a new sponsor.
“Without continued access to gaming licenses, you have no asset value,” he added. “That makes it very difficult to raise capital.”
Buckfire has advised lenders of Station Casinos Inc STN.UL and worked with the Mashantucket Pequot Tribal Nation in evaluating strategic alternatives for Connecticut’s Foxwoods Resort Casino, according to the firm’s website.
Casinos seeking to sell their real estate to raise cash for operations are likely to have trouble, he added.
“Any time you can push off your capital risk to someone else, it’s a great trade,” Buckfire said. “Whether they can find someone who wants to do that...I’m not sure that anyone out there is dying to put their money into a casino.”
Ross said his firm, WL Ross & Co, known for restructuring companies, is investigating possible casino investments. He has held back since “we haven’t had the defaults yet.”
“We’re following very closely what’s going on but we haven’t seen any real opportunity yet,” he said. WL Ross & Co manages about $10 billion. Las Vegas casinos, as opposed to those in Atlantic City, offer more attractive investment opportunity, he told Reuters.
Smaller, so-called roadside casinos have a better chance of making money as larger casino chains have high overhead costs that crimp profit margins, said Buckfire.
When disposable income is tight, a gambler might not want to make the trek to Las Vegas, but “roadside casinos are a low-cost option,” he said.
Reporting by Chelsea Emery, editing by Leslie Gevirtz