Casino Plan With Penguins Is Capri Island’s Biggest Bet

Isle of Capri Casino Inc. operates the world’s largest number of river boats and dockside casinos, but has never undertaken a project as ambitious as the one proposed in Pittsburgh. The $250 million casino will be the largest among a 13-year-old gambling operator in terms of estimated income and income, as well as the 3,000 slot machines to start. But what makes the project even more aggressive is the island of Capri’s commitment to provide $290 million for a new stadium in the Pittsburgh Penguins, the only state-licensed bidding partner for the casino in the city.

“It’s going to be ambitious compared to other projects we’ve been working on,” said Tim Hinkley, president and chief operating officer of Island of Capri. The company believes that it is a gamble worth taking. Mr. Hinckley estimated gross annual income at more than $400 million, saying that Pittsburgh’s casinos would still be able to make a profit even if they added 54 percent of the state tax on construction costs and slot income.

History of High Growth
An aggressive strategy is nothing new for the company that started in Biloxi, Miss., in 1992, after founder and chairman Bernie Goldstein pulled out a cash-lost casino in Iowa and washed away along the Mississippi River to the Gulf Coast.

Mr. Goldstein, an Iowa scrap metal merchant and river freight forwarder, has since connected a network of 15 casinos on the Biloxi River, most of which are based in the Mississippi Valley. Starting with 400 employees and $50 million in sales in his first year, his company grew to 11,000 employees and $1.1 billion in gambling sales.

It operates four casinos in Mississippi, three in Louisiana, three in Iowa, two in Colorado and two in Missouri. It also operates casinos in the Bahamas and operates pompano park harness racing tracks in Florida. 온라인경마

The 10-member Biloxi casino has generated $611 million in revenue for the state, $185 million for the city and $73 million for city and county schools over the years. Capri Island, which leases land from the city, will probably generate more revenue from gambling and property taxes than any other operator, Biloxi Mayor A.J. Holloway said.

State Representative Bobby Moak, chairman of the Mississippi House Gaming Committee, said Capri Island was one of the first cities to operate casinos in Biloxi since Hurricane Katrina and continued to pay employees after the hurricane shut down operations for months.

“The island of Capri in Mississippi is close to the standard by which we can judge others in the state,” he said. In at least one way, Pittsburgh is not Capri Island’s dice. Since its inception, the company has selected a medium-sized market for aggregating growth rates in search of areas with limited competition and high return on investment.

“They have a company’s direction towards the local market,” said Paul Girvan, managing director of Innovation Group, who helped craft Pennsylvania’s Slot Machine Law. But as the fast expansion of Isle of Capri has generated high debt, Wall Street and Illinois Attorney General Lisa Madigan have expressed concern that increased leverage could raise long-term operational concerns.

S&P and Moody’s put Capri Island on credit watch after Katrina, which destroyed the gambling operator’s Biloxi casino and a casino barge under construction. Hurricane damage and one-off costs from a $14 million lawsuit settlement resulted in a $4.2 million loss during the quarter ending in October, Isle of Capri reported.

In December, Standard & Poor’s removed its credit watch and confirmed Isle of Capri’s BB rating, but maintained a negative outlook, citing the company’s rising debt in light of its announced expansion plans. Michael Servo, director of Standard & Poor’s, said he expects the company to benefit from its investment strategy in the coming years as new properties or expansions begin to make money.

He described Capri as a “healthy company” and said the BB rating was “the right middle” for gambling operators. He added that Capri, which has both steel and land-based assets, is more diverse than many gambling companies. Isle of Capri said Pittsburgh has already received a commitment from Toronto-based CIBC World Market, an international investment bank, to buy the stadium and casinos.

“Their financing is very solid,” Penguins president Ken Sawyer said. “They’re key players. We made sure of that.” He said the Penguins had held discussions with about a dozen casino operators before deciding on Capri Island. The company’s choice of operator was because it was one of the biggest in the industry, and because it had great success in getting its licenses, and because it had offered to build a new stadium in the city devoted to financing, Sawyer said. “They were the best candidates for us. It was important for someone to step in a big direction and make a dramatic offer like a stadium,” he said.

the share of the problem
Over the years, Capri Island and its former operators have competed with regulators, officials and other operators, but its history “doesn’t seem to be any different from other operators in such a highly regulated industry that you’ll be fined for blowing your nose,” as Mr. Sawyer put it

“Every company will pay very little regulatory fines here and there. I’m not aware of any major issues with them. They operate in many areas,” said Joseph Weinert, vice president of industry consultant Spectrum Gaming Group.

In December, Isle of Capri paid $14.35 million in Jefferson County, Missouri, to settle a lawsuit after abandoning plans to build a casino in Kimswick. The company was also fined $250,000 by the Missouri Gaming Commission for making four misrepresentations on its casino application.

Vice President Alan Solomon said Capri Island has decided to suspend the project for several reasons, including opposition from the residents of Kimswick. He said the misrepresentation cited by the Gaming Commission was related to the status of permits required for the project and was unintentional.

In addition, the casino operator also paid a $377,500 fine to settle claims filed by the U.S. Treasury Department against two Mississippi casinos in 1999. The U.S. government said casinos in Biloxi and Vicksburg failed to report 75 currency transactions worth more than $10,000 each in 1993 and 1994 as required by law. Solomon said the fine also included “unintentional violations” that hurt other gambling operators.

In 1993, Casino Cruise Inc., a company run by Mr. Goldstein, was fined $255,000 by the Illinois Gaming Commission after being accused by the board of helping Par-A-Dice Riverboat in eastern Peoria buy expensive casino equipment from an unlicensed dealer owned by a relative of Mr. Goldstein.

Mr Solomon said the matter was related to a “minimum type of dollar.” He said Mr Goldstein was not personally involved in the matter, but he and his family agreed to pay the fine. Casino Cruises paid most of the fine.

Last year, Isle of Capri made a $518 million bid at an auction for the final casino license in Illinois. The license, held by the Emerald Casino Company, was auctioned off after Emerald filed for bankruptcy. But the victory was short-lived. The Illinois Gaming Commission found that Emerald misled the state over ownership and committed other violations. It revoked the license, essentially canceling the winning bid for Isle of Capri. The company plans to pursue the license. Every casino on Capricorn has a Caribbean theme. Pittsburgh’s proposed casino will retain its trademark flavor with some upgrades.

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