This one appears to be heading for the “Be careful what you wish for” file.
Ohio has staked a significant portion of its future economic well-being on the gambling industry, and, with voter approval, removed legal barriers previously in place which prevented its growth.
Setting aside the moral hazard issues (which are of course quite relevant), gambling casinos have been sold as economic panaceas throughout the nation, and it’s simply not working out. They certainly didn’t save Detroit, and Atlantic City is dealing with extraordinarily hard times. Many other dominos may soon fall.
A major player in that industry is in deep trouble, and its apparently imminent implosion would almost certainly have Buckeye State impact:
AS DEBT MOUNTS, CAESARS IN TALKS WITH LENDERS
Caesars Entertainment said Friday it is prepared to start formal discussions with some of its bank lenders as it works to reduce its debt and stave off what some see as near certain bankruptcy.
In a filing to the Securities and Exchange Commission, the casino company announced that it has reached out to some of its creditors – namely bank lenders – to find ways to ease pressure on its $24.2 billion debt.
That came a day after the company promised its creditors who are first in line a claim on cash held by its debt-strapped subsidiary Caesars Entertainment Operating Co. in case it defaulted. It’s been in formal talks with that group of creditors, too, for about a month.
… The tricky part … is the creditors who are second-in-line.
… the company owes more than the company is worth to those who are first-in-line to be paid back. That leaves little for those second in line.
Those in the latter position have declared Caesars already in default of its agreements. The company dismissed the contentions in recent securities filings.
“It’s just hard to see everybody agreeing to a deal without a pretty long bankruptcy proceeding,” (Fitch Ratings financial analyst Alex) Bumazhny said.
… The company has 52 casinos in the United States and abroad with most bearing the Caesars, Harrah’s and Horseshoe brand. About 68,000 people worked for the company at the end of 2013.
The company’s related press release is here.
Properties of immediate Buckeye State interest include Horseshoe Cincinnati and Horseshoe Cleveland.
The parent company lost $853 million on $4.2 billion in revenues during the first six months of this year. It had interest expense of $1.25 billion during that period.
None of this is news at the Cincinnati Enquirer, at least based on a vain search for the word “Horseshoe” on its home page, and the results (i.e., none relevant) of a search on “Horseshoe.”
Cleveland.com appears to be similarly devoid of news.
6-1/2 years of a miserable national economy, dating back to the POR (Pelosi-Obama-Reid) Economy’s inception, have left most Americans with little discretionary income. Ohio has over that period been harder hit and has recovered more slowly and unevenly than most other states. People with little discretionary income and a modicum of sense aren’t inclined to gamble away what little they have.
This doesn’t appear to be destined to end well. If it doesn’t, it will apparently come as a big surprise. It shouldn’t.