Full House Resorts Secures $5.6 Million in Paycheck Protection Loans for Two Casinos
Posted on: May 14, 2020, 11:05h.
Last updated on: May 15, 2020, 09:42h.
Full House Resorts Inc., a publicly traded casino operator, received Paycheck Protection Program (PPP) loans totaling more than $5.5 million for two of its five properties. That’s according to documents the Las Vegas-based company filed with the US Securities and Exchange Commission.
A nearly $3.4 million loan went to the Rising Star Casino Resort in Rising Sun, Ind., and a $2.2 million loan went to Full House’s Bronco Billy’s Casino in Cripple Creek, Colo.
The PPP is an initiative that Congress created through the CARES Act to help small businesses keep employees on payrolls while the COVID-19 crisis forced many companies to either shut down completely or severely curtail their operations.
Eligible companies can qualify for up to 10 weeks of payroll, with loans capped at $10 million. The Small Business Administration (SBA) loans are also forgivable if at least 75 percent of the principal is used for payroll purposes.
Lawmakers from gaming states touted the program as a way for small casinos and other businesses that rely on gaming for income, such as rural taverns, stay afloat while the coronavirus pandemic forced them to close.
However, when the SBA first released its rules for the program, the federal agency used guidelines from 1996, which made any business that earned more than a third of its income from gaming ineligible for the program. That rule forced at least one casino, the Lakeside Inn in Nevada, to announce it would close for good after it was denied a loan more than a month ago.
After the first $349 billion round of funding was exhausted, Congress agreed in late April to make $320 billion in additional funding available. Currently, there’s about $120 billion available for companies.
Watchdog Questions Publicly Traded Recipients
Some watchdog groups have criticized the PPP initiative, saying that publicly traded companies have taken advantage of loopholes to secure funding that was meant for smaller, mom-and-pop businesses. Some businesses, like the Los Angeles Lakers, announced they were returning the money they secured through the program.
Accountable.US reported that more than 500 publicly traded companies have received PPP loans worth more than $1.5 billion.
“Workers at small businesses are struggling to pay rent and put food on the table during this crisis and they need help,” said Derek Martin, a group spokesman, in a statement. “Instead, the Trump administration continues to throw money at public companies that have other means to weather this storm.”
However, in a call with investment analysts Wednesday, Full House President and CEO Daniel Lee touted the company’s use for the loans at both properties. For instance, the loans helped Full House retain the player development hosts for both casinos, which happen to be in remote sections of their states.
The PPP loan for Rising Star, Lee added, will help that casino get back to 400 employees by the time it hopes to reopen in mid-June. After Indiana shut down its casinos two months ago, the active workforce at the Rising Star – which happens to be the largest employer in the state’s smallest county – dwindled down to about 20.
We are kind of prime candidates for the program, and we’re using it the way it’s intended to try to put people back to work,” Lee said.
Lee added that the program also incentivizes the company to bring back workers and find new roles for them during the shutdown. Those who worked as bartenders may now be asked to paint, but they’re getting their usual paycheck and benefits, including insurance.
Repayment a Possibility
Depending on how quickly Full House can get employees back to work at the two casinos will determine if the company can get the loans forgiven.
“It looks at your first eight weeks from when the loan gets funded, we were funded last Friday (May 7),” Lee told analysts. “So, if we can put people back to work now, it’s kind of subsidized.”
Some in Congress have been working on legislation that would extend the time frame for bringing workers back and still make the loan forgivable.
If the Rising Star must pay back part of its loans, the documents filed with the SEC show that the Indiana casino would pay up to $191,000 a month for 18 months starting in December. Bronco Billy’s would pay slightly more than $124,500 a month over the same time.
Both loans were processed by Nevada State Bank.
SBA Revises PPP Guidelines
On Wednesday, the SBA, after consulting with the Department of Treasury, issued additional guidelines regarding who is eligible for PPP loans. The new rules indicate that small businesses can still qualify if they have more than 500 full- and part-time workers, provided they meet the SBA’s definition for its industry.
For casino hotels, the standard is average receipts of $35 million annually. However, the SBA also has an alternative standard for any business. Businesses with a “tangible net worth” of no more than $15 million and an average net income after federal taxes of $5 million over the last two full fiscal years also qualify.
The guidelines also make subsidiaries owned by large businesses eligible. But those businesses must certify that the current economic climate makes the PPP loan essential for their daily operations.
“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification,” the agency stated.
As of the close of trading Thursday, Full House had a market cap of $39.5 million.
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