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Way back when there was a time when casino developers could get anything they wanted in the forms of loans. They usually were awarded low interest rates and for the most part had no problem paying back the loans once the casinos were built. That was then, this is now.
Lenders are backing off of giving out loans to casino developers. The industry has shown for the first time that it is not immune to the problems of the economy and lenders are taking notice.
Already this year, three developing companies, Tropicana Entertainment LLC, Greektown Casino, and Legends Gaming, have all filed for bankruptcy protection. With gambling revenue down across the country, there could be more companies following that path.
“The expectation was that in a down economic cycle that gaming would still do well, but gaming is showing that it’s vulnerable,” said analyst Keith Foley of Moody’s Investors Services.
While the big companies should be able to withstand these tough economic times, the small casinos where the owner only has one property are the ones that could be in danger financially.
The fuel prices and people getting laid off from their jobs are not good signs that the revenue for casinos could increase anytime soon. People are still gambling, they are just not gambling as much, and that is more bad news for casinos.
The lenders, meanwhile, have basically stopped all loans to casino developers. Don Barden was awarded a casino license in Pittsburgh but had to turn over control of the project after he could not find the financing to complete the project.