International edition
June 23, 2021

According to Moody's Investor Services

Pennsylvania's gaming laws could hurt Atlantic City

(Reuters) - Pennsylvania's legalization of table games will have a negative impact on the credit profiles of struggling casinos in nearby Atlantic City, Moody's Investor Services said last week.

T

able games generate over us$ 1 billion annually in Atlantic City, or 30 percent of its total annual gaming revenue, and some of this could find its way over to Pennsylvania, the agency said in a report.

"This represents a large potential market for Pennsylvania, particularly for casinos located in the eastern part of the state and in relatively easy driving distance to Atlantic City," said Moody's analyst Keith Foley.

Last week, the state's lawmakers completed passage of a bill to legalize games such as poker and blackjack at casinos to generate us$ 250 million in revenue and balance the state's budget.

Gaming revenue at Atlantic City has been falling for three straight years, hurt by a drop in consumer spending and a growing number of slot parlors opening in nearby states.

In November 2009, the latest data available, gaming revenue slumped 13.4 percent from a year ago. Roughly two-thirds of total gaming revenue came from slot machines in November, according to the New Jersey Casino Control Commission.

Moody's said that Atlantic City casino operators Harrah's Entertainment Inc. and Trump Entertainment Resorts Holdings could be especially hurt by the decision.

"Because these companies - already suffering from weak gaming demand and increased competition from slots in Pennsylvania - are bound to see further declines in gaming revenues owing to the new table game legislation," said Foley.

But while the new laws will be positive for Pennsylvania's gaming revenue overall, it will not be enough to positively affect the credit ratings of the companies that own gaming facilities in eastern Pennsylvania.

This is because many of those casino operators are rated B3, or six notches into junk status, or lower and generate most of tier revenue outside of Pennsylvania, Moody's said.

Moody's also said that the approval of table games in Pennsylvania highlights a much broader issuer for the industry.

"Namely that there are more states and more facilities scrapping over an ultimately finite -- and possibly permanently smaller- pie," Foley said. He said the laws could spark more states to enact legislation to make gaming attractions more competitive, ultimately pushing costs higher for Pennsylvania.

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