Penn National Gaming COO Snowden Says Company is Having Conversations About Possible Tropicana Las Vegas Sale
Posted on: November 1, 2019, 09:36h.
Last updated on: November 1, 2019, 11:45h.
Penn National Gaming (NASDAQ:PENN) is looking to reduce its debt burden, and part of that effort could include selling assets, such as the Tropicana Las Vegas.
Prairie State Gaming, the company’s video gaming terminal business in Illinois, has also been mentioned as a piece Penn National could divest as part of its effort to reduce its leverage to five times on a lease adjusted basis by the end of next year.
The company reported third-quarter results yesterday, noting it reduced traditional debt by $97.2 million during the quarter, and that its leverage ratio stood at 5.6 times as of Sept. 30. That whittled the operator’s debt to about $11 billion, down $1.16 billion from the end of last year.
We have a couple of wholly owned very valuable assets in our portfolio that we believe are not appropriately valued in our share price today,” said Penn National COO Jay Snowden on a conference call with analysts and investors. “And there have been recent transactions both in Las Vegas on the strip, as well as in the route operation business in Illinois, at very attractive multiples in both cases.”
In addition to Tropicana, Penn National’s Nevada properties include the M Resort Spa Casino in Henderson and Cactus Pete’s Resort Casino in Jackpot. Those venues have not been mentioned as possible divestment ideas.
As Casino.org reported earlier this month, the Tropicana and the Illinois gaming machine business are in play as sale ideas for Penn National. Some analysts believe Penn National could command $700 million or more in a sale of the Strip venue, for which the company has received what it deems to be “unsolicited interest.”
“And so we continue to receive some unsolicited interest in Prairie State Gaming, as well as some of the land holdings that we have in Las Vegas at Tropicana,” said Snowden without revealing the sources of the interest in those assets.
When Penn National acquired the Tropicana in 2015, it paid about $10 million an acre for the 35-acre property. But based on recent Strip real estate transactions, analysts think the company could fetch up to $20 million per acre today ($700 million).
“We’re continuing to engage in those conversations,” said Snowden. “We’ll see where they take us. We’re encouraged by some of those conversations, but nothing’s done until it’s done.”
Some gaming companies that are shopping assets are quick to put time frames on those deals. For example, MGM Resorts International (NYSE:MGM) said earlier this week it could close on a sale of the MGM Grand by early 2020.
When it comes to the Tropicana and Prairie State Gaming, Penn National is avoiding time constraints.
“Given the fluidity of these discussions, it’s impossible to put any kind of timetable on this,” said CEO Timothy Wilmott. “If something does obviously come to a conclusion, we’ll certainly get that information out as quickly as we can. But it’s as I said, a fluid process.”
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