UNITE HERE, AFL-CIO, North America's union of 250,000 casino, hospitality, and service workers, provides the following analysis of significant risks accompanying Pinnacle Entertainment's (NYSE: PNK) upcoming transactions.
Highlights
- Dan Lee, Pinnacle's ex-CEO, resigned last month after a St. Louis County vote approving a potential new competitor for the Company's roughly $1 billion investment in the area. The Company is still searching for a CEO.
- The Company expects its future performance in St. Louis to provide roughly half the Company's total estimated future earnings, but market studies cast doubt on those predictions.
- The Company's continuing ability to use its President Casino license to block additional competitors from the crowded St. Louis market remains uncertain. The state gaming commission rejected the Company's plans in August. The Company has sued the state to reverse the decision.
- In 2006, the Company obtained protections from picketing and other adverse labor and economic activity at its St. Louis complexes, but following its recent actions, the Company's interests are no longer protected by an agreement. In August, Pinnacle rejected a proposed settlement with the National Labor Relations Board of unfair labor practices against it. The Labor Board is considering whether to seek an injunction.
- Pinnacle has multiple outstanding obligations to the City of St. Louis, including the development of downtown luxury condominiums in the next three years. Meanwhile, downtown condo values have fallen 15% in 2009.
- The Company's St. Louis woes are compounded elsewhere, including:
- a $400 million vacant lot near the boardwalk in Atlantic City
- the looming breach of financial covenants precipitating the upcoming refinancings
- the unresolved 2010 expiration of the Company's credit facility;
- an outstanding commitment to Louisiana to start construction on $565 million worth of new casinos in 2010, despite no announced financing, softness in that market, and the prospect of legalized gambling in Texas.
Missouri UNITE HERE International Vice President Tim Luebbert says, "After a series of costly missteps, the Company has an important opportunity to make some corrections. We look to the new leadership to operate in a way that is more responsive to stakeholders."
Copies of the report and supporting documentation are available here, or contact Dana Wise at 916-335-9745. UNITE HERE urges potential investors to review the analysis and stay tuned for further updates.
Contacts:
UNITE HERE
Dana Wise, 916-335-9745
dwise@unitehere.org
