Fitch: Casinos recovering from Sandy, but effects may linger

1 November 2012

CHICAGO -- (PRESS RELEASE) -- Gaming operators in Atlantic City, N.J., and across the mid-Atlantic region appear poised to reopen properties affected by Hurricane Sandy relatively quickly, limiting the storms impact on cash flow. However, Fitch Ratings believes longer-term effects on physical infrastructure and consumer sentiment in New Jersey and surrounding states could have a material impact on fourth-quarter gaming demand.

Despite major damage suffered on the Atlantic City Boardwalk, industry officials have indicated that gaming properties have not experienced the type of physical damage that would prevent their re-opening over the next few days. Gaming companies will likely recover some of the lost cash flow from business interruption and property damage insurance.

The bigger question for the industry remains the status of roadways and other infrastructure in the Atlantic City and feeder areas, which may limit the ability of casino employees and customers to get to Atlantic City's 12 gaming properties easily. Fitch also believes that regular customers in the region may be preoccupied for some time with storm recovery, potentially lowering visitation volumes for a few weeks.

Relative to Hurricane Irene, which hit the region on an August weekend, revenue and EBITDA losses from Sandy will be mitigated by the fact that disruption has occurred during a low-demand, midweek period. However, the post-storm effects could be more severe, resulting in material pressure on fourth-quarter operating results.

Caesars Entertainment Inc. (Caesars), which has four properties affected by Sandy, indicated on its earnings call yesterday that it expected to reopen its Atlantic City properties shortly, pending government approvals.

Trump Entertainment, Revel Entertainment Group, LLC and the Marina District Finance Co. (owner of the Borgata Hotel Casino and Spa, a joint venture between MGM Grand Resorts, LLC and Boyd Gaming Corporation) generate all of their cash flow from Atlantic City. Caesars also has significant exposure to the market, with approximately 15% of consolidated EBITDA coming from that market.

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