MotorCity Casino and Greektown saddled with debt, falling revenues; investors making demands

1.25.09

MotorCity, Greektown deal with bad hands of debt

By Chad Halcom and Nancy Kaffer

Two Detroit casinos are rolling snake eyes in the debt market.

A top ratings service downgraded its outlook for MotorCity Casino's parent company, citing a host of financial concerns. Greektown Holdings L.L.C. has until the end of this week to submit a reorganization plan that can resolve its swelling debts without need for a sale.

An agreement entered in U.S. Bankruptcy Court last month between the troubled Greektown Casino owners and its creditors gives the parties until Feb. 1 to submit a “co-exclusive” plan to restructure and settle its debts.

In other words, if the casino company doesn't submit a plan — with the consent of as many bondholders and other litigants as possible — by the deadline, creditors can submit restructuring plans of their own.

The Detroit City Council expects to meet today in a closed session with its Law Department and Chicago-based law firm Shefsky & Froelich Ltd. to review confidential new documents in the ongoing bankruptcy case, in which Detroit is a party.

A deputy press secretary for Detroit Mayor Ken Cockrel Jr. said he believes Greektown will submit a plan by week's end, but an attorney for the casino's creditors said there it might be “difficult” to craft a complete plan with all parties' consent by the deadline.

As late as last week, involved parties were discussing the shape of a reorganization plan, said Robert Gordon of Detroit-based Clark Hill P.L.C. and attorney for Greektown's unsecured creditors' committee.

Greektown, majority-owned by the Sault Ste. Marie Tribe of Chippewa Indians, and the creditors have also had to discuss a few preliminary offers to buy the casino and its assets, which came in earlier this month as part of the proceedings, Gordon said.

“There still has to be some digestion of the proposals that have come in,” he said. “That's why I think there's going to be some possible difficulty or delay in crafting a full plan before the deadline.”

Marian Ilitch-owned MotorCity's fiscal woes were enumerated in a statement posted on Moody's Investors Services' Web site, announcing the downgrade of parent company CCM Merger Inc.'s outlook to negative.

Last fall, CCM owners contributed $25 million in cash equity to enable the business to meet its September debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio. Moody's analysts warn that another equity infusion might be required for CCM to meet its year-end debt-to-EBITDA ratio.

CCM's debt limit is currently seven times EBITDA, according to Moody's, but that ratio could increase in 2009 because of a drop in gaming revenue — down 11 percent in December — that could offset earnings from the casino's expansion and lead to negative cash flow.

CCM's owners would have to ask to amend its lending covenants to increase its debt-to-EBITDA ratio or risk becoming noncompliant, according to Moody's.

Greektown may have its work cut out in proving it can resolve debts as it faces falling revenue and lost market share. A 2008 revenue and tax collection report prepared by the Michigan Gaming Control Board shows that revenue fell for all three casinos in December, with Greektown's dropping 12 percent.

MotorCity ended 2008 with $464 million in revenue, compared with $480 million in 2007. Greektown finished with $316 million compared with $341 million last year.

“Nothing before us suggests the industry isn't still solvent. The casinos as a whole showed 1.8 percent revenue growth over the previous year,” said Rick Kalm, the Gaming Control Board's executive director.

Edward Gudeman, president and managing partner of bankruptcy law firm Weik & Associates P.C. in Royal Oak, said Greektown's ability to control its own future likely comes down to showing an ability to make a profit on operations — exclusive of debt.

“If they can't show that in the plan, or the plan fails to execute, the case could be converted to Chapter 7 and be forced to sell,” he said.

Greektown sought bankruptcy protection in May, citing at least $243 million in unsecured debt to 40 unsecured creditors, and has since gained regulatory approval from the Gaming Board to borrow another $100 million more.

A new hotel is expected to open in a newly built tower along Monroe Street next month.

Chad Halcom: (313) 446-6796, chalcom@crain.com
Nancy Kaffer: (313) 446-0412, nkaffer@crain.com

Ilitch granted exception so family's Olympia Entertainment can be leveraged to benefit her casino

11.18.08

Ilitch casino gets exemption
State says Olympia Entertainment can book acts

By Daniel Duggan

Marian Ilitch has won an exemption from the Michigan Gaming Board and now can use Ilitch-owned Olympia Entertainment to do bookings for the new theater at MotorCity Casino, despite a law prohibiting casinos from using vendors in which they have an ownership interest.

Negotiations on the exemption began before the theater was completed in September and, as a result, only two shows have been booked at the 1,886-seat theater since, both under special one-time-use exemptions.

The gaming board's executive director issued a one-year exemption to the casino Nov. 7, saying the arrangement doesn't “harm the integrity of gaming” in Michigan.

Using Olympia Entertainment is a crucial part of the business plan for the new theater, Sound Board, so that bookings for performers at the casino can be made in conjunction with Comerica Park, the Fox Theatre and shows at other venues booked by Olympia Entertainment, said MotorCity COO Rhonda Cohen.

“Being able to leverage acts with the other Olympia Entertainment venues gives us access to better acts,” Cohen said.

When it comes to Michigan casino owners using vendors they also own, a measure of control is needed, said Richard Kalm, executive director of the gaming board. The spirit of the law is to ensure that a casino company doesn't take over all the vending companies in the area and create a monopoly, he said.

“And we're always worried about organized crime and theft,” Kalm said. “So, entities have to be kept separate.”

In evaluating the case with Ilitch Holdings, Kalm said there is no apparent concern from a gaming standpoint.

“In dealing with Marian Ilitch and Ilitch Holdings, we've never had any problems with them, and they've been perfect in reporting to us,” he said. “But you have to look at these issues carefully.”

Kalm has sole discretion to grant such an exemption to a company as long as it “preserves the integrity of gaming and protects the public.”

Several conditions apply to the exemption. The casino is required to issue quarterly reports on activities with Olympia, and the deal is subject to annual re-approval.

A similar exemption was granted to MGM Grand Detroit Casino because the Las Vegas-based gaming company MGM Mirage (NYSE: MGM) — which owns an interest in the Detroit operation — also owns a travel agency in Las Vegas, which is used to bring guests to Detroit, Kalm said.

Exemptions also have been issued in the past for Olympia so that all three casinos can purchase luxury boxes for sporting events and buy season tickets.

Daniel Duggan: (313) 446-0414, dduggan@crain.com

Judges reverses MGCB decision to shut down Detroit casinos

Posted 9.29.07 at mLive.com



Judge: Detroit casinos can stay open during shutdown

By DAVID EGGERT
The Associated Press

LANSING, Mich. (AP) — Detroit's three casinos can stay open even if state government partially shuts down next week, a judge ruled Friday.

Wayne County Circuit Judge William Giovan's decision reversed a ruling by the Michigan Gaming Control Board. The board said Thursday it would have to suspend the operations of the casinos if state government partially shuts down Monday.

"Putting pressure on the Legislature is not an excuse for torturing our statutes into something that they're not, and that's what happened here," Giovan said Friday. "Putting pressure on the Legislature is not a reason to cause the devastation, and I'm going to call it that, that would have occurred in terms of tax revenues and jobs for people."

State attorneys representing the gaming board were weighing an emergency appeal late Friday, said Matt Frendewey, spokesman for Attorney General Mike Cox. But time was dwindling before the weekend and it appeared likely the casinos would stay open Monday.

"It's a victory for the 7,000 workers at the three Detroit casinos who will not be furloughed," Greektown Casino spokesman Roger Martin said. "It's a victory for public schools in Michigan and public safety programs in the city of Detroit that will continue to benefit from $1 million a day the three casinos pay to them."

Giovan issued a temporary restraining order and preliminary injunction blocking the gaming board from suspending operations at the casinos.

Gov. Jennifer Granholm has said casinos would be among the casualties of a partial state shutdown because state employees who monitor and regulate the casinos would be among those temporarily laid off. The plan goes into effect Monday unless lawmakers and Granholm agree on a way to resolve a $1.75 billion projected deficit for the next fiscal year.

State parks, lottery sales, driver's license renewals and liquor distribution are among the other services that could be disrupted.

Michigan law requires that state regulators be onsite daily to monitor operations at the MGM Grand Detroit, Greektown and MotorCity casinos.

Richard Kalm, executive director of the Gaming Control Board, said that without state regulators in place, the integrity of each casino would be at risk when it came to payoffs, security and patrons' safety.

But casino lawyers said their casinos had enough surveillance and security in place that they could operate without state regulators on-site.

MGCB Exec poised to give 24-hour notice for Detroit casinos shutdown

9.27.07

Detroit casinos will shut down if state partly shuts down

By ZACHARY GORCHOW
FREE PRESS STAFF WRITER

The Michigan Gaming Control Board voted today to halt gambling at Detroit’s three casinos if a state government shutdown occurs, preventing state inspectors from regulating the three facilities.

Richard Kalm, executive director of the control board, said if there’s no budget agreement between Gov. Jennifer Granholm and the state Legisltiare, he would issue a notice at 12:01 a.m. Sunday, ordering the three casinos to suspend gambling within 24 hours.

Indian-run casinos in Michigan are not affected by the order.

Attorneys for MotorCity, Greektown and MGM Grand Detroit, said they would need to review the order before determining how to respond, but said going to court to keep the casinos open is an option.

The attorneys told the board they see no legal athority for the state to suspend gambling, but Kalm said state law requires the presence of inspectors at the casinos to handle any alleged violations and disputes over payouts.

Budget talks involving Granholm administration officials and lawmakers from both parties were continuing at the Capitol today. But there were no signs a breakthrough was imminent.

Lawmakers are trying to hash out a solution to a potential $1.75-billion deficit in the fiscal year that begins at midnight Sunday.

MGCB says it will be forced to shut down Detroit casinos

9.27.07

Detroit casinos fight possible shutdown by state

By COREY WILLIAMS
Associated Press Writer

DETROIT (AP) -- The Michigan Gaming Control Board ruled Thursday that it would have to suspend the operations of Detroit's three casinos if the state government partially shuts down when the budget expires next week.

Gov. Jennifer Granholm did not specifically mention casino oversight in an evening address televised nationwide. But the state government Web site listed "state-licensed casino gaming in Detroit" among the services that would cease operation without a budget in place by Monday.

Michigan law requires that state regulators be onsite daily to monitor operations at the MGM Grand Detroit, Greektown and MotorCity casinos.

Richard Kalm, executive director of the Gaming Control Board, said that without state regulators in place, the integrity of each casino would be at risk when it came to payoffs, security and patrons' safety.

Lawyers for Greektown Casino will scrutinize the order over the next 24 hours, spokesman Roger Martin said following Thursday's meeting.

"We are extremely supportive of gaming control rules, but we're disappointed with this order," Martin said.

The state would lose about $450,000 a day in taxes if the casinos are forced to close, Martin said, while the city of Detroit would lose about $440,000 daily. He added that each of the three Detroit casinos pays the state $9.25 million annually for gaming oversight.

Martin and Cheryl Scott-Dube, general counsel for MotorCity Casino, both said they believed their casinos had enough surveillance and security in place that they could operate without state regulators on-site.

Board Chairman Damian Kassab said the commission was reluctant to order the temporary closures, but had no choice.

"We're basically hog-tied by the Legislature," he said after the meeting. "This will impact very good corporate citizens. Hopefully, this will give the Legislature some incentive to do what they should have done months ago."

No budget legislation has been passed for the fiscal year starting Oct. 1 and the Legislature has not resolved a projected $1.75 billion shortfall. Michigan's constitution requires a balanced budget be in place in order for the state to spend money.

James Canning, a spokesman for Detroit Mayor Kwame Kilpatrick, said after Granholm spoke that it was "too premature to speculate about what's happening with the casinos."

But, Canning added, "After hearing the governor and majority leader speak, we are optimistic - as they are - that a solution will be found before the deadline, and we will support any efforts to get past this budget impasse."

A state government shutdown would not affect Michigan's 18 Indian casinos because there's no state oversight at those facilities.

Move afoot in Lansing to relax standards used to license Detroit casino employees

9.14.07

State may relax casino hire rules
House bill would allow applicants with criminal records to be considered for nongambling jobs.

Charlie Cain / Detroit News Lansing Bureau

LANSING -- As Detroit's new, permanent casinos prepare to open, Michigan may relax the legal requirement that requires all casino workers to clear an exhaustive background check.

That should let some applicants with criminal records to at least be considered for some casino jobs.

Dealers, croupiers and others directly involved in gaming would still be subject to the investigation, required to obtain a state license.

But cocktail waitresses, custodians and others not directly associated with gambling would not, under a bill sponsored by [House Bill 5212] Rep. Steve Tobocman, D-Detroit...

...Tobocman said casinos already conduct background checks before turning names over to the Michigan Gaming Control Board for licenses. He said it's not likely that casinos would hire someone with a felony conviction for such crimes as larceny or fraud. But people convicted of other crimes, who have paid their debt to society, should not be automatically penalized for life, he said.

The gaming board does not license an applicant convicted of any felony; a misdemeanor involving gambling, theft, dishonesty or fraud; or those who are "unsuitable" due to questions of "integrity, moral character or reputation."

...The Michigan Gaming Control Board opposed the bill last year. The board's new executive director, Richard Kalm, said he wants to review the bill before deciding whether to maintain that position.

"We do eliminate convicted felons from working in the gaming area," said Kalm, who spent more than 30 years in the Macomb County Sheriff's Office...

..."we haven't eliminated people for misdemeanors, just crimes involving honesty, like larceny and misdemeanor fraud.

"We do a darn good job with the way the legislation is. We want to review it to make sure we're not taking a step back," he said.

A spokesman said MotorCity Casino, which plans to hire as many as 2,500 additional employees for its new casino, said it has taken no position on the bill. (Complete Story)

MGCB may be forced to close Detroit's casinos Oct. 1

9.21.07

Gaming board stumped by potential state shutdown

Joel J. Smith / The Detroit News

DETROIT -- The Michigan Gaming Control Board postponed a decision today on whether or not to order the three Detroit casinos closed on Oct. 1 if the lack of a new state budget forces a shutdown of government services.

The board has scheduled a special meeting for 2 p.m. Thursday to discuss the possible casino closures again.

The four-member board was reluctant to vote on the issue because the casinos produce nearly $1 million a day in tax revenue for the state and city of Detroit as well as paying all costs of the gaming board.

Gaming board employees regulate the casinos and are at the casinos 24 hours a day to make sure things are run according to state law.

"I'm been told to prepare for a complete shutdown of the casinos," said Richard S. Kalm, executive director of the agency. "We have to be prepared if the state shuts down government."

Kalm submitted a proposed resolution to the board asking them for the authority to order the casino licenses suspended in the event the governor sends the agency personnel home amid the budget dispute.

Damian Kassab, chairman of the board, said that while reluctant to approve such an order, the board has little choice in the matter if his employees can't conduct their normal oversight of casino operations.

He submitted a resolution, but couldn't muster a second from any of the three other board members.

They called for a 20 minute recess, then came back and scheduled the next meeting for Thursday.

Attorneys for the three casinos attended today's meeting, vigorously opposed to any shutdown of the casinos. They argued that the casinos had nothing to do with the budget dispute in Lansing and they were becoming unnecessary victims in the ordeal.

They hinted they might seek a court remedy if the gaming board ordered the gambling halls to close.

But Kassab said he's hopeful a budget solution can still be worked out and will make the casino issue moot.

"Hopefully we won't have to meet next week," he said.

You can reach Joel J. Smith at (313) 222-2556 or jsmith@detnews.com

MGCB moves to Detroit, former GM headquarters building

9.21.07

Cadillac Place, which is the old GM building, now houses state of

Michigan offices, but the facility has a 10 percent vacancy rate.

Gaming board moves to Detroit

Many of the 50 state employees expected to give up jobs because of economy and commute.

Joel J. Smith / The Detroit News

The state is transferring some 50 employees now housed at the Michigan Gaming Control Board headquarters in East Lansing some 90 miles away to the state's office building in Detroit -- a move some say will force most of those veteran workers to quit their jobs.

The switch will help fill empty office space at Cadillac Place, the former General Motors Corp. headquarters building leased by the state since 2001, after the automaker's move to its new quarters in the Renaissance Center.

Many of the affected gaming board employees are unhappy about the move, saying it will be impossible to sell their Lansing-area homes in the current poor economic climate and that it is cost-prohibitive to even consider the long commute between Lansing and Detroit.

The shift will be made by April 30 or sooner, state officials said this week.

"It is a major move for the employees," said Liz Boyd, press secretary to Gov. Jennifer Granholm. "But it's important to know that these are very tough times in state government."

Some employees upset over the pending move already are looking for work closer to home.

Matthew Clark, a financial analyst with the board, will start at a new job on Monday with the Michigan Treasury Department in Lansing.

"I love my job," Clark said. But, "there is no way I can afford to commute to Detroit. I can't sell my house in this market. The housing market is really poor around here. There are 'For Sale' signs posted all over the place. Houses just aren't moving."

General fund to get a boost
The move will give the state a cash infusion.

The gaming board currently leases two floors in the Abbott Center in East Lansing for $582,000 a year from a private landlord. That money comes out of the funds collected from the three Detroit casinos and 18 Indian casinos in the state. No money for operating the gaming board comes from the state's general fund.

With the board's move to Cadillac Place, the $582,000 in rent now can be paid to the state, according to officials with the state's Department of Management and Budget office, which is coordinating the move. They admit it's a way for the state to get its hands on money that is restricted for use only by the gaming board.

The state, which is trying to resolve a $1.8 billion budget deficit, will put the money into its general fund.


Move hits key employees
The gaming board already occupies a satellite office in Cadillac Place for those who work closely with the three Detroit casinos. But the administration and others, who deal with casino suppliers and Indian casinos mostly in northern Michigan, are housed in the East Lansing offices.

Richard S. Kalm, executive director of the board, said he is concerned about the impact of the move on employees. For his part, the move will make Kalm's commute shorter because he lives in Romeo in Macomb County.

"I don't want to lose anybody," Kalm said. "But I do know that some of our people already have taken other jobs. It's not pleasant. I'm not excited about it. But this decision was made and since I head the agency it is my job to get it done.

"I'm going to try to minimize the impact on personnel and keep this place running efficiently."

Kalm was not involved in the decision to relocate the headquarters.

He said his biggest concern is the human factor and the impact on long-term employees, some of whom have been with the agency since it opened in 1997.

The move involves key and experienced employees in such areas as administration, investigation, financial analysts and recordkeeping.

The relocation also involves support staff such as clerical and secretarial workers.


Space available in Detroit
Some gaming board employees argue the personal economics of relocating to Metro Detroit just don't make sense.

Many employees have spouses already working in the Lansing area and can't move their household.

Those who chose to commute would pay city of Detroit income taxes, parking and extra fuel costs. The commute also would mean time away from families.

A straw vote by employees indicated that most felt they would leave rather than take the transfer, workers said.

Some of the workers believe that Gov. Granholm ordered the move to help the financially ailing city of Detroit.

But Edward Woods III, a spokesman for the Michigan's Department of Management and Budget, said it is a win-win solution for the state, getting it out of a private lease and utilizing empty space in Cadillac Place.

He said that the 1.3-million-square-foot office building in Detroit's New Center area is more than 10 percent vacant; the gaming board move will lower the vacancy rate to 9.5 percent.

"It's a major impact on the employees," Woods said.

"It is a challenge to sell a house with these market conditions. I'm sympathetic to their concerns.

"But it's their choice if they want to make the move."

You can reach Joel J. Smith at (313) 222-2556 or jsmith@detnews.com.

Governor Granholm Appoints Kalm Exec Director of Michigan Gaming Control

Gov Granholm today announced the appointment of Richard S. Kalm as exec dir of the Michigan Gaming Control Board. Kalm, of Romeo, is chief of staff for Macomb County Sheriff. He has more than 30 years experience. Previously he held ranks of deputy sheriff, lieutenant, sergeant, corporal, captain, and division commander.



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