Thursday, February 13, 2003
Copyright © Las Vegas Review-Journal

GAMBLING BEYOND NEVADA: Sources: Giants scramble in Illinois

Wynn Resorts, MGM Mirage, Harrah's vying for coveted riverboat license

Wynn Resorts, MGM Mirage and Harrah's Entertainment are jostling for position in an effort to gain the elusive 10th Illinois riverboat casino license, as insiders say a casino near Chicago could be a cash cow for the operator and the state.

But when, how and even if the last license will be awarded is far from clear, as political, legal and regulatory roadblocks loom, industry executives said.

Wynn Resorts is one of at least three companies to file proposals to buy Illinois' 10th license, Wynn said Tuesday.

Wynn said he believed MGM Mirage and Harrah's Entertainment also submitted or plan to submit proposals for a Chicago-area casino.

A New York investment bank is vetting the bids, he said.

Wynn's proposal would have Wynn Resorts and Chicago real estate magnate Neil Bluhm each acquire a 40 percent stake in a Des Plaines, Ill., riverboat, with a yet-to-be announced minority partner owning 20 percent.

The riverboat would be a "boat-in-a-moat," sitting in a man-made, 9-inch-deep body of water.

"This site is closer to Chicago's wealthiest suburbs than the other Chicagoland casinos," Wynn said. "This is the checkmate position."

Wynn said the proposed Des Plaines site is six city blocks from the Rosemont location current license holder Emerald Casino planned for its riverboat before the Illinois Gaming Board voted not to renew the company's casino license in 2001.

"Because it's so close to the (O'Hare) airport, there are 6,000 hotel rooms right there," Wynn said. "The location is fabulous. This is the best riverboat site in America."

Deutsche Banc's Andrew Zarnett said it's clear that the industry's major players are keenly interested in Chicago, citing the relatively few slots that serve the market.

"The Chicago market is so underpenetrated," Zarnett said. "The right Chicago-area property would be a big growth driver and could provide a healthy return on investment."

MGM Mirage's Alan Feldman declined Wednesday to say whether his company has also filed its own proposal to buy the 10th license, but informed sources said the Strip heavyweight has done so.

"We're still extremely interested in Illinois as a market, and are just trying to keep up with all of the developments there, on a daily basis," Feldman said.

MGM Mirage made a $615 million offer to buy the license early last year, but withdrew it in June after Illinois lawmakers raised the top marginal tax rate on gambling win to 50 percent and bumped the casino admission tax to $3, up $1.

The new offers for the license take the new tax rate into account, Wynn said, although he declined to place a value on his bid for competitive reasons.

Harrah's spokeswoman and former Las Vegas Mayor Jan Jones was unavailable for comment Wednesday, but informed sources said Harrah's is also interested in the 10th license. The company already owns two Illinois boats, the maximum allowed under current state rules.

"Harrah's would have to divest one boat, or, more likely, get the rule changed," Zarnett explained.

The Deutsche Banc casino industry debt analyst said a Chicago riverboat would have a proportionally bigger impact on Wynn Resorts' cash flow and revenue than on results at bigger competitors MGM Mirage and Harrah's.

"If Wynn gets a license it would also give Chicago an opportunity to get a resort property, a place that could attract conventions and offer entertainment," Zarnett said. "That could be beneficial for greater Chicago."

Illinois Gaming Board spokesman Gene O'Shea said the agency is waiting for Emerald to file a bankruptcy reorganization plan with the U.S. Bankruptcy Court.

O'Shea declined to say how the reorganization plan, expected to name one or more of the proposals to buy out the Emerald license interest, would affect the state's plans for the license.

Another complicating factor is the Illinois Supreme Court, which recently agreed to hear a court case filed by a group of investors who lost in the competition for the state's final license in 1994 and have been trying since then to find another way to build a casino north of Chicago.

The lawsuit, thrown out by two lower courts, challenged changes to the state's riverboat laws the investors believe were crafted to help the Rosemont developers.

"It's murky," Zarnett said. "(Wall Street) doesn't really understand what needs to happen."

MGM Mirage's Feldman said his company remains interested despite the variables.

"This has been a very complex undertaking because there are so many different paths, legal and political," Feldman said.