Only a few days ago, Steve Wynn, CEO of Wynn Resorts, was gladhanding in Philadelphia and seducing the press with designs for a new casino, but today, Wynn dropped out of the $250 million Foxwoods project, most likely due to fear that the project would add to the company's debt load and drop share prices.
Looking at the company's annual report, I knew that Wynn, like most Las Vegas casino operators, was conducting business while shouldering a lot of debt, but I guess I forgot the statement, "We are highly leveraged and future cash flow may not be sufficient for us to meet our obligations, and we might have difficulty obtaining more financing."
The bolded italics are actually in the annual report. And "highly leveraged" means $3.6 billion as of Dec. 31, 2009. And according to the rules of running casinos in Macao -- if Wynn defaults on taxes, contributions, premiums or other payments, they can take over all the company casinos.
The $3.6 billion or so also means that debts to assets was about half, but still enough for Forbes to tout Wynn Resorts as a buy -- provided it dropped the Philadelphia idea. Perhaps the board and shareholders thought so, too.
Wynn announced late Thursday in a press release:
Wynn Resorts, Limited announced today that Development Associates, LLC, and certain other of its wholly owned subsidiaries have terminated all agreements and negotiations with respect to a potential investment in the Foxwoods Casino project in Philadelphia, PA.Those in Philadelphia appeared stunned by the news, including Mayor Michael Nutter. According to the Inquirer:
"We are fascinated by the legalization of full gaming in Pennsylvania and stimulated by the opportunity that it presents for Wynn Resorts, but this particular project did not, in the end, present an opportunity that was appropriate for our company," commented Stephen A. Wynn, Chairman and CEO of Wynn Resorts, Limited.
"I've never seen anything like this before," said Nutter, speaking Thursday evening to reporters at 30th Street Station after returning from a trip to Washington.Photo: Wynn Resorts
The mayor said he had "a great meeting" with Wynn that lasted 75 minutes.
"I've never seen someone more enthusiastic about a project," Nutter said. "There was not one doubt in my mind after our meeting" that the casino project was moving forward.
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