Rivers Casino Credit Rating Drops to Dismal Low

Investors in Rivers Casino are pouring more money into the underperforming facility.  The investors include Rivers Casino Chairman Neil Bluhm and the Detroit fire and police pension funds that together are putting up $108 million to pay for the table games license, retire existing debt and provide liquidity.  While this may seem like welcome news to some, it is viewed as a strong negative by the bond rating agency Standard and Poor’s (S&P).



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Is the Casino Being a Good Citizen?

When Pittsburgh’s casino license passed from Don Barden to Neil Bluhm, the latter agreed, as a condition to the transfer, to honor all obligations associated with that license-which includes an annual $7.5 million payment for the new hockey arena. The original agreement called for the first payment to be made October 2009. Mr. Bluhm first balked at making this payment earlier in the summer and while negotiations with the Sports and Exhibition Authority continue, this deadline looms closer. If his casino doesn’t honor this obligation, state taxpayers will be on the hook.

Through an arrangement of leases and subleases, the Commonwealth of Pennsylvania-i.e. the taxpayer-is responsible for paying the debt for building the new Penguins’ palace if the casino is unable. But here’s the catch: the money has to be appropriated by the Legislature. This is an interesting situation considering the State doesn’t have a full budget and is lamenting falling revenues. It’s highly unlikely the Legislature will approve the gubernatorial request to cover the casino’s first payment.

The main reason for the casino’s objection is that they just opened in August and hasn’t had time to earn the money to make the payment. Since its initial opening the casino has earned gross terminal revenues of $20.1 million-well below their projections-of which 55 percent must be paid in taxes. That leaves roughly $9 million to pay expenses such as personnel, maintenance and operations, and debt service.

But the payment is coming due and the taxpayers should not be saddled with his problem. The Rivers Casino could more easily find the money by perhaps borrowing against future revenues. When he took over the slots license Mr. Bluhm promised to be a good citizen. Stepping up and making the payment would be a great first step in keeping that promise.

Bluhm on the Hook but Squirming: Taxpayers May Get Tab

With less than a month until the Rivers Casino opens in Pittsburgh the slots parlor is facing a $7.5 million payment due this October for its share of the hockey arena debt service. Predictably, casino owner Neil Bluhm is balking at making his first payment so quickly. Instead he insists that his first installment is not due until 2010 at the earliest and possibly not until 2012. Will this be settled amicably or through the courts?

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