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Casino gaming giant to rescue smaller casino

Posted on July 12th, 2010

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Talks have recently started involving gaming giant Harrah’s Entertainment to help revive the ailing Foxwood Casino. Harrah’s involvement will replace Steve Wynn, as a partner, developer and manager of the casino. Negotiations are already in place, said one source. Harrah’s can soon own up to only 33% of Foxwood Casino’s stake, due to the fact that another Harrah’s Entertainment casino is already in the state. Even at only 33 percent ownership, under the negotiation terms, Harrah’s will also be expected to perform development and managerial functions. Another incentive that Harrah’s may be looking at in acquiring shares of Foxwoods Casino is the $67.3 million amount payable to the casino from local investors for the land of the project.

Foxwood casino, then only a 16 acre land, was sold in 2005 by an affiliate to Harrah’s Entertainment to partner which included Ed Snider, Comcast-Spectacor chairman and Lewis Katz and Rob Rubin. Investors that have failed to pay the investment amount in full have given promissory notes maturing in 2015. Spokeswoman to Harrah’s Entertainment Jac Peterson and Foxwood lawyer F. Warren Jacoby both did not release any further information.

After acquiring its license in 2006, the casino has experienced struggles one after another. The Connecticut tribe that is supposed to run the casino faced financial troubles back in their home state, hometown politicians as well as from neighboring states have also showed opposition to the casino project. When local investors planned to move the casino to Center City, their plan was cut short by state lawmakers and had it remain in the shores of the Delaware River. Steve Wynn, who was supposed to salvage the casino from its downhill fate, unfortunately backed out from the deal last April. The Pennsylvania Gaming Control Board soon was looking to revoking the casino’s $50 billion license.

However, the Foxwoods group which is the Philadelphia Entertainment and Development Partners are fighting back on the planned revocation. Last month, the group announced to talking to 5 potential investors to the casino. Harrah’s is said to be the leading choice among others. When Harrah’s took over Caesar’s Entertainment in 2005, the parcel of land which is now Foxwood Casino was also turned over to them. Caesar’s entertainment was originally set to bid together with the Katz and Rubin group for one of the two slot licenses in the state. But when Harrah’s took over Caesar’s, their plan was with a group on investors in Chester. The Chester group did not want to compete with a sister project in South Philadelphia. As a result, Harrah’s abandoned the plan to acquire the slot license in Philly and just accepted the promissory note from Katz and Rubin for the parcel. Katz and Rubin in turn pitched the idea with the Mashantucket Pequot tribe instead.

Gaming experts say that it is a smart move for Harrah’s to invest in Foxwood. Harrah’s has 52 casinos in six different countries and makes about $11 billion every year. The company handles both full scale and smaller casinos in major regional locations that includes Mississippi, Iowa, Missouri, Louisiana, Illinois and Indiana. Add Chester to the list and Harrah’s will be operating 4 major casinos in Atlantic City. Gaming Expert Alex Picou says it is a “very logical move for Harrah’s to be interested in investing in Foxwood Because of the $67 million amount payable to the casino from local investors.” Picou works for an investment banking firm of KeyBanc Capital Markets. This will make Harrah’s Entertainment own the most number of casinos than any other company in the world.

Harrah’s Entertainment began its operations in Reno, Nevada 70 years ago and expanded its empire by development, acquisition and expansion of different properties on the world’s four continents. These properties operate primarily under the Harrah’s, Caesars and Horseshoe brand names. However, Harrah’s Entertainment also owns the London Clubs International family of casinos and the World Series of Poker. On January 28, 2008, the company was acquired by affiliates of private-equity firms TPG Capital and Apollo Global Management. It’s core values lie on building loyalty and value for customers, employees, business partners, and communities by being the most service-oriented, technology-driven, geographically-diversified company in gaming. Harrah’s Entertainment currently employs 85,000 employees.