Caesars Entertainment Corporation ( CZR ) has announced its plan to shutter its Showboat property in Atlantic City to trim East Coast gambling hub operations due to persistent revenue declines and rising property taxes in the region. The Showboat resort and casino will shut its doors on Aug 31, this year.
The gambling industry in Atlantic City is declining as Showboat will be the second casino to close this year after the Atlantic Club, which was closed down in January.
Atlantic City was once the booming gambling market in the Northeast region of the U.S. However, in recent times, gambling venues opening in New York, Pennsylvania and Connecticut have significantly dented the market in New Jersey. In fact, total revenue last year in the Atlantic City was $2.86 billion, according to state figures, plummeting from $5.2 billion recorded at its peak in 2006.
However, in the over competitive Atlantic City market, the closure makes sense, as The Showboat is the poorest-performing of the four Atlantic City casinos owned by Caesars Entertainment.
Caesars, one of the largest operators in Atlantic City, has struggled to service its debt taken in the $30.7 billion leveraged buyout in 2008, led by Apollo Global Management LLC ( APO ) and TPG Capital. Additionally, the company incurred wider year-over-year losses in first-quarter 2014, as some of its largest markets like Atlantic City and the U.S. Midwest registered declining revenues, further adding to the woes.
In its attempt to repay the loans, Caesars has sold less profitable assets, transferred properties between its subsidiaries, refinanced borrowings and sold equity in the past few quarters. In such a situation, closing down the Showboat property is justified.
Caesars currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the same sector include MGM Resorts International ( MGM ) and Wynn Resorts Ltd. ( WYNN ). Both these stocks sport a Zacks Rank #2 (Buy).
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