Casino stocks drop with markets

Associated Press

Monday, April 20, 2009 | 4:03 p.m.

Casino stocks fell Monday as investors dumped shares across all industries after a six-week rally while gambling investors continued wondering how casino companies would manage debt and large projects.

JPMorgan upgraded Las Vegas Sands Corp. from neutral to overweight on Monday, as shares in the Las Vegas-based company controlled by billionaire Sheldon Adelson fell 40 cents, or 8 percent, to $4.63 in afternoon trading.

Analyst Joseph Greff said he had reasonable expectations for Sands' Las Vegas Strip casinos and a better appreciation of the company's ability to avoid breaking obligations on its debt.

The company, with an ambitious pipeline of casino-resorts that has been scaled back as consumers pull back on spending, is pushing forward on projects in Bethlehem, Pa., and Singapore.

"Our upgrade is not without meaningful risks, which include but are not limited to ... (Las Vegas) getting meaningfully worse from here and uncertain capacity additions do in fact open and cannibalize its (Las Vegas) assets," Greff wrote.

MGM Mirage Inc. shares dropped $2, or 20.3 percent, to close at $5.02 amid rampant rumors and unconfirmed reports about the company and its largest project, the $8.7 billion CityCenter complex on the Las Vegas Strip.

Las Vegas Sands Corp. shares dropped 39 cents, or 7.8 percent, to close at $4.64. Wynn Resorts Ltd. shares fell $2.32, or 7.1 percent, to close at $30.44.

Meanwhile, the Dow fell 289.6 points, or 3.6 percent, to close at 7841.73, while the S&P 500 fell 37.21 points, or 4.3 percent, to close at 832.39.

MGM Mirage, majority owned by billionaire investor Kirk Kerkorian, on Friday covered its share and partner Dubai World's half of a $70 million construction payment for the project.

Dubai World's $35 million share was the second payment covered by MGM Mirage while the 50-50 partners hammer out a deal to assure the project is completed.

Dubai World expressed worries about MGM Mirage when it sued the Fortune 500 company last month and said the casino company's statements about its financial health put CityCenter at risk.

Dubai World also alleged that MGM Mirage has mismanaged CityCenter, though MGM Mirage officials have said that Dubai World has been involved in CityCenter's progress since the partnership started in August 2007.

Dubai World said it was particularly concerned about comments in MGM Mirage's annual report warning that it could default on its debt and be forced to seek bankruptcy court protection.

Dubai World manages investments for the Arab emirate state, which announced in February it would issue $20 billion in bonds as the city-state appeared to be waning amid a deepening global economic crisis.

The federal United Arab Emirates government quickly bought the first tranche of $10 billion.