- President Trump signs stimulus bill making $450bn in loans available to gaming and other industries
- Penn National Gaming sells Tropicana Las Vegas, furloughs 26,000 employees
- MGM Resorts believes $3.9bn in cash will allow the company to weather the pandemic
The $2.2trn stimulus package signed by President Trump on Friday provides relief for the troubled U.S. gaming industry, as several states extend shutdown orders leaving casino companies to update their business strategies.
“The emergency economic relief arrives at a critical moment,” Bill Miller, CEO and president of the American Gaming Association (AGA), said in a note to the organization’s members.
“The unprecedented pandemic has effectively shut down our industry,” Miller said. “Past federal responses to natural disasters and financial crises excluded gaming companies from assistance available to the rest of the business community. Some called to do so again (in this bill).
“But with the help of industry leaders, the AGA convinced lawmakers that gaming deserves the same access to economic relief available to every other industry.”
Last week, the AGA estimated casino closures will cost the U.S. economy $43.5bn in economic activity if casinos remain closed for two months.
According to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, gaming companies are eligible to seek some $450bn in government loans designed to protect workers from layoffs and keep companies solvent.
Meanwhile, the bill allows eligible workers to receive unemployment relief for an additional 13 weeks, making some 650,000 casino employees eligible for 39 weeks of assistance instead of 26 weeks.
“This is a good start,” Chris Cylke, AGA’s senior vice president of government relations, told VIXIO GamblingCompliance. “It’s going to get money to companies that need help the most.”
Cylke said the gaming industry is in a much different position than it was in 2005 when Hurricane Katrina decimated casinos in Louisiana and Mississippi. He noted that following Hurricane Katrina the gaming industry was left on its own to finance its recovery.
“That was very unfortunate,” said Cylke. “The AGA was able to push through [assistance] because we are in a much different position now than we were in 2005; we operate in 43 states.”
The CARES Act states that any company receiving a government loan would be prohibited from buying back stock while getting assistance as well for an additional year.
Companies that keep workers on the payroll despite a significant loss of revenue could get a tax credit. They could also defer paying some social security taxes.
Shortly after Trump signed the stimulus bill, Penn National Gaming announced it was selling the Tropicana Las Vegas and a planned mini-casino in Pennsylvania to Gaming & Leisure Properties (GLPI), the real-estate investment trust it spun off a few years ago, for $337.5m in rent credits to help cover the financial impact from the pandemic.
Penn, which operates 41 properties in 19 states, also said it will implement unpaid furloughs, affecting approximately 26,000 employees company-wide starting April 1. The company’s casinos have been closed for more than two weeks as state-ordered shutdowns have tried to slow the spread of the virus.
In addition, the deal with GLPI includes an option for Penn to acquire the operations of GLPI’s Hollywood Casino in Perryvile, Maryland, at a future date.
“While this transaction will help relieve liquidity pressure in terms of rent obligations, we are committed to taking further steps to reduce our ongoing operating expenses in order to ensure we have a healthy business to return to when we are able to re-open our doors,” said Penn president and CEO Jay Snowden.
Snowden attributed the unpaid furloughs to a number of states announcing extensions of their temporary closure orders from earlier this month. He said he expected more states to follow suit.
Also on Friday, Boyd Gaming and MGM Resorts International updated their employees and shareholders on the ongoing impact of the coronavirus outbreak.
Keith Smith, CEO of Boyd, said over the last two weeks the company has focused on closing each of its 29 properties in ten states in an orderly fashion. Boyd also closed the operations of Lattner Entertainment, its video gaming terminal (VGT) business in Illinois.
In a letter to employees, Smith said the company would continue to pay full-time and part-time workers through April 10. He added that Boyd would reopen its properties for business “as soon as state officials agree that it is safe to do so.”
Meanwhile, MGM said it believes it has enough liquidity to weather the economic downturn due to the coronavirus outbreak and the resulting closure of the company’s casinos across the U.S.
“While this undoubtedly will have a significant negative effect on our business in the near term, we are well-positioned to emerge from the current crisis in the light of our strong liquidity position and valuable asset portfolio,” MGM acting CEO Bill Hornbuckle said in a statement.
Since March 16, MGM temporarily has closed all of its U.S. properties, including 13 on the Las Vegas Strip, in an effort to stem the outbreak. MGM employs more than 70,000 people at 20 resorts nationwide.
In a filing with the U.S. Securities and Exchange Commission, MGM said it had approximately $3.9bn in operating cash and cash investments available to support the company during the closures.
The company does not have any debt obligations due until 2022. MGM is also actively reviewing all of its capital spend projects and expects to defer at least 33 percent of planned 2020 capital expenditures.
Hornbuckle attributed its strong liquidity position to a cost-savings program introduced last year.
“With the continued execution of the MGM 2020 plan, as well as the implementation of aggressive cost savings initiatives, we believe the company will be able to manage its expenses while navigating this unprecedented event,” Hornbuckle said.
Hornbuckle stressed that MGM is making some very difficult decisions, but “these will be in the best interest of the company long term.”