The casino needs the support because it’s a single-property company, according to an industry watcher, who said “in some ways, it’s a positive,” since if lenders step in, they still have confidence in the property.
“If Revel was owned by a company with five other casinos, you wouldn’t even be hearing about the need for a revolver. The issue is it’s owned by a single-property company, and it needs the extra money because it’s not being supported by other casinos,” said John Kempf, managing director of RBC Capital Markets‘ gaming research sector. “The signal here is, despite their numbers being weak, lenders have come in and decided to support them. In some ways, it’s a positive.”
The resort currently has solid commitments for $30 million from its $50 million credit facility, and announced Monday afternoon it wants its lenders to expand that credit capacity to $100 million.
Kempf said “what we’ve been hearing is the indications of interest for those are fine right now,” and like Revel CEO Kevin DeSanctis, he expects lenders to make the additional $70 million commitments.
“Obviously, the casino opened up below expectations … but there are many people who still believe having a brand new, very nice casino is a good thing for Atlantic City,” Kempf said. “I think everyone knows the gaming market is very difficult right now, and there’s a lot of competition in the region. Revel will need to have more quality products to compete with those other markets, and it will need more credit to do that.”
Jeff Vasser, president of the Atlantic City Convention and Visitors Authority, said another reason why the casino wants to extend its line of credit in late August is it’s “anticipating slower months ahead.”
“Right now is the time everybody’s planning for their cash flow needs. In the summer, they fill their coffers to hold out for the winter months, and that’s just the way the business cycle works — though I can’t say for sure if anyone else is extending their credit right now,” Vasser said. “Operationally, I don’t see this having any impact on Revel at all. But come next fall, after a year of ramping up its reserves and having the meeting business kick in with the offseason, I think we can assume we’d see a second summer stronger than its first, and a payoff from that cash flow.”