Las Vegas Sun

March 28, 2024

Moody’s upgrades gaming industry after ‘marked improvement’

The U.S. casino industry, slammed by the recession since 2008 as consumers put the brakes on spending, may finally have bottomed out.

Moody's Investors Service today revised its outlook for the U.S. gaming industry to stable from negative.

Moody's said the stable outlook reflects its belief that the overall credit conditions of the U.S. gaming industry will neither erode nor improve "materially'' during the next 12 to 18 months.

"Although monthly gaming revenue by jurisdiction varies considerably, overall, U.S. gaming revenue was flat year-over-year in March and April 2010, and it appears the trend will hold for May," Keith Foley, senior vice president at Moody's, said in a statement. "While not a stellar performance, it's a marked improvement over the consistent -- and often substantial -- declines of 2008 and 2009. It also has favorable implications for gaming company operating profits, a majority of which comes directly from slot machine and table game revenue."

The debt rating agency said that while some U.S. gaming companies will continue to experience operating profit declines in the near term, Moody's anticipates this trend will flatten during the second half of 2010 as monthly gaming revenue demonstrates continued stability and year-over-year comparisons begin to benefit more fully from aggressive cost-cutting actions taken in the second half of 2009.

The industry, with many companies carrying huge levels of debt, continues to face challenges.

"Moody's believes consumer spending on this highly discretionary form of entertainment will remain under pressure. This will make it challenging for U.S. gaming sector conditions to materially improve from their very weak levels, and for many U.S. gaming companies to reduce their significant debt burdens,'' Moody's said today.

Today's report follows other recent encouraging news:

--Both Moody's and Standard & Poor's within the past two months revised their outlooks on Las Vegas Sands Corp. from negative to positive. While the company's Asian operations are showing strong results, the debt rating agencies also noted improvements in operating trends for the company in Las Vegas and Pennsylvania.

--Paulson & Co., a big player on Wall Street, has recently invested $1 billion in the industry by buying stakes in MGM Resorts International, Boyd Gaming Corp. and Harrah's Entertainment Inc.

--Gaming win in the nation's largest market, the Las Vegas Strip, posted two consecutive increases this year before retreating just 0.93 percent in April on a year-over-year basis to $437.2 million.

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