Mar 21, 2020, 11:01 am
The Covid-19 coronavirus has effectively quarantined the nation's gaming industry.
More than three dozen states with commercial casinos or Indian gaming facilities have taken actions to suspend casino operations, enacted limitations that led to a shutdown, or have seen gaming companies and tribal leaders independently close their properties.
By late Tuesday, MGM Resorts International — one of the nation's leading gaming companies — will no longer have a casino property in operation in the U.S.
"We're clearly entering uncharted territory here with casino closures," SunTrust Bank gaming analyst Barry Jonas said in an email Monday.
New York, New Jersey, Pennsylvania, Louisiana, Colorado, and Mississippi have seen their governors or state gaming regulators order temporary closures.
MGM on Monday closed the Borgata in Atlantic City after Governor Phil Murphy's directive and later decided to suspend operations at Beau Rivage and Gold Strike in Mississippi ahead of Mississippi Governor Tate Reeves' edict to do so.
The coronavirus has silenced MGM's 20 properties in the U.S., including 13 in Las Vegas. Some 70,000 MGM employees in the U.S. were sidelined while 30,000 slot machines and 1,400 table games went unplayed.
On Sunday, MGM and Wynn Resorts said they were voluntarily closing more than a dozen Las Vegas Strip properties to help stem the viral outbreak that has gripped the nation.
"Given that there isn't a mandate for Las Vegas casinos to close yet, I think it speaks strongly about MGM and Wynn management protecting both its employees and customers; though at a certain point there may not be a commercial argument to stay open," Jonas said.
MGM is far from alone in its pain.
Through Monday, Penn National Gaming has closed 24 casinos in 11 states, impacting more than 17,325 employees. The company has 41 gaming properties in 19 states. CEO Jay Snowden said Penn will pay its full-time workers through the end of March.
Over the weekend, Boyd Gaming Corp. closed five casinos in four states. Monday's actions in Mississippi and Louisiana means another four properties will be closed for a company that has 29 casinos in 10 states.
Eldorado Resorts closed 10 casinos in seven states, including three properties each in Mississippi and Louisiana.
Meanwhile, more than a dozen states with casinos have yet to shut down operations. On the Las Vegas Strip, many casino operators are closing amenities, such as retail outlets, restaurants, swimming pools, nightclubs, and lounges — or reducing operating hours — in order to reduce staffing levels.
"The clear question now becomes how long can the entire industry stay in business with casinos closed (or even open) while coronavirus dictates our daily lives," Jonas said.
Layoffs and furloughs becoming a concern in Las Vegas and other markets
American Gaming Association CEO Bill Miller said state governments and elected leaders need to support casino workers and the ancillary businesses that will "bear the brunt" of the shutdowns.
"In a matter of days, the U.S. casino industry went from a growing, thriving segment of the U.S. economy to a near standstill," Miller said in an emailed statement. "We are witnessing a rapidly increasing number of our nation's commercial and tribal casinos that have been shuttered, impacting 40 percent of all casino employees. This will have a dire effect in the communities in which we operate across 43 states. Our immediate priorities are actions that provide liquidity to allow us to support employees."
Nevada Congresswoman Dina Titus, the co-chairwoman of the Congressional Gaming Caucus, whose district includes the Las Vegas Strip, said employees in the gaming capital are facing uncertain times.
"The Strip will not be the same for now, but it will come back stronger," Titus said. "This will get worse before it gets better, but it will get better. Our city is a resilient one and soon we will prove that once again."
On Monday, the Dow's nearly 3,000-point decline and President Donald Trump's declaration that coronavirus could last until July or August frightened both the investment community and gaming leaders.
"It is amazing how quickly this country has talked its way into a potential recession and brought the gaming industry to a temporary halt," said Global Market Advisors partner Brendan Bussmann.
The market declines were stunning in many senses. MGM stock lost 33.61% of its stock value to close at $10.25. Penn National was down 44.8% to close at $8.54. Boyd Gaming's value dropped 29.34% to close at $10.84.
The $17.3 billion merger between Eldorado Resorts and Caesars Entertainment has several analysts pondering whether the plan to close the deal in first half of this year is still possible. Eldorado fell 24.37% to $13.78 while Caesars was down 28.39% to $6.08.
Several companies began drawing down unused credit lines to help cover costs, according to filings with the Securities and Exchange Commission.
Caesars Entertainment said it has fully drawn the remaining available capacity under three credit facilities, totaling more than $1.15 billion in debt. Churchill Downs told creditors it was drawing down $700 million in debt while Penn National borrowed the remaining $430 million of its credit line.
"The company elected to draw down the remaining available funds... to ensure it maintains ample financial flexibility in light of the spread of coronavirus," Penn said in the filing.
Deutsche Bank gaming analyst Carlo Santarelli said the discussions around gaming companies will soon cover liquidity and capital resources "and the ability to stem the tide of the closures."
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