COVID-19 might force some casino operators into bankruptcy
Some casino operators don’t have enough liquidity to withstand a long-term shutdown
With such a large number of customers that casinos and gambling facilities welcome every day, the pause in their business operations is starting to burn the cash they have left. According to some sector experts, several gaming operators could be facing bankruptcy if the current coronavirus situation continues to worsen. Based on a recent Macquarie Research report, US casino companies might be having anywhere from 5.2 months up to 14.3 months of existence before running out of cash.
To put some specific situations in perspective, Penn National Gaming is on the low end, burning close to $6.4 million daily. That means that, within 5.2 months, it could run out of cash. Another example is MGM Resorts International, which is burning an impressive $14.4 million daily, leaving the company with only 9.4 months of cash available. On the high end, there are casinos like Century Casinos, Monarch Casino & Resort and Full House Resorts that have reports of spending daily from $200,000 to $300,000, and which have somewhere between 5.8 to 14.3 months of cash to spend. The report also mentions Golden Entertainment, with daily expenses of $1 million, leaving them with 10.4 more months of available cash. Red Rock resorts are having a better situation spending $1.7 million daily; it gives the company at least 13.8 months to survive.
Richard McGowan, a finance professor at Boston College who follows the gaming sector closely, showed real concern about the current situation for casinos. “The casino industry was way over leveraged so the virus is attacking like a person who was compromised even before contracting the virus,” said McGowan to Casino.org. He added, “They [the projections] are probably quite accurate. The debt to equity is public knowledge, and so given that they will have no cash flow, it is easy to predict when they will run out of cash.”