Tuesday, May 28, 2002 | 11:04 a.m.
Coast Resorts Inc., a big operator of Las Vegas locals' casinos, registered Friday to take the company public with an initial public stock offering. Coast said some of the proceeds may be used to finance a $65 million expansion of its Suncoast hotel-casino in Summerlin.
Coast, which has 7,260 Las Vegas employees, also owns the Orleans, the Gold Coast and the Barbary Coast hotel-casinos.
Coast officials could not be reached for comment on why the company may go public.
But the IPO comes amid Wall Street optimism about the gaming industry, which has performed strongly since Sept. 11 compared to the rest of the economy, said Jason Ader, a gaming analyst with Bear, Stearns & Co.
"The timing right now is really to take advantage of this newfound optimism in the gaming industry and in the Las Vegas (locals') market, where they have been successful."
First-quarter gains in revenues and profits among gaming companies ranked in the top 5 percent of all industries, Ader said.
Going public will make Coast Resorts a stronger company financially and give it a vehicle for future acquisitions, added Larry Klatzkin, a gaming analyst with Jeffries & Co.
"That's a considerable amount of cash (to) pay down debt."
But some personalities at private companies have difficulty transitioning into the public sphere, he said.
"The visibility and the spotlight is something they're not used to and it's something they have to deal with."
In registering to sell up to $200 million in stock, Coast said the proceeds would be used to pay down some of its $395 million in debt and would help finance these planned and ongoing expansion projects:
The Suncoast expansion, which would commence in the first half of 2003, includes a 70,000-square-foot casino addition, a 1,600-car parking garage and four new restaurants. The casino project would include 700 more slot machines, a poker room, a new sports bar, additional table games and a new casino bar. This would be the second expansion for the Suncoast, which opened in the Summerlin district of Las Vegas in September 2000. An earlier $11 million expansion more than doubled the number of hotel rooms from 200 to 419.
The $150 million expansion of the Orleans, which started in January 2001 and had cost $85.1 million through March 31. That project includes a 2,600-car parking garage, a 586-room hotel tower, a special events area, 40,000 square feet of new gaming area and public space, six additional movie theaters, a spa and fitness center, two restaurants and an Irish pub.
The $60 million expansion of the Gold Coast, which started in late 2000. The project includes a buffet, the renovation of rooms, redesign of the public areas, 16,000 square feet of additional meeting space, a 1,300-car garage, an expanded porte cochere, 20,000 square feet of new gaming area, a new bingo parlor, a sports bar and two Italian restaurants. Through March 31, Coast had spent $39 million on that project.
Development of a new, previously announced hotel-casino in south Las Vegas on 55 acres on Las Vegas Boulevard 6 miles south of Tropicana Avenue adjacent to Interstate 15 and near the Silverado Ranch master-planned community. Construction is set for the second half of 2003 of a hotel-casino with amenities comparable to the Suncoast. The Suncoast was built at a cost of $200 million.
No date has been set for selling the stock. Bank of America Securities LLC and Morgan Stanley are lead managers of the offering.
Besides providing Coast an alternative to issuing more debt to finance its projects, the stock offering may provide Coast insiders a market to sell some of their shares.
The closely held company said it's controlled by officers and directors Michael Gaughan, Jerry Herbst, J. Tito Tiberti and Franklin Toti, who together own 62 percent of its stock. The stock is not now publicly traded. Gaughan is the chairman and chief executive. Total shareholders' equity is now valued on paper at $168 million.
Coast reported a profit of $11.4 million on revenue of $135.1 million in the first quarter ended March 31, up from $10.7 million and $127.5 million in the year-ago quarter. Cash flow advanced 7.1 percent to $34.4 million.