Financial Group report; IOC now predicted to win slots license

With about two months to go before the awarding of the slots license for Pittsburgh, the Isle of Capri is now the front-runner to win the license, at least according to Equity Research Gaming published by the Susquehanna Financial Group.

So, take it with a grain of salt, we're all gonna read a bunch of articles pro-IOC and pro-Harrah's in the coming weeks.

In addition, the following detail was copied with courtesy of LGP poster "Ott";

We have updated our current odds on the applicants to operate a stand-alone casino in Pittsburgh in the wake of the recent buy-out offer for Harrah’s and the new ownership of the Pittsburgh Penguins. Recall that there are three bidders for the license to operate a casino in the city of Pittsburgh – Isle of Capri, PITG Gaming (Don Barden), and Station Square Gaming (HET/Forest City). In this report, we increase the odds for the ISLE bid and decrease the odds for the HET/Forest City bid. In our view, the ISLE bid is now the front runner for the Pittsburgh license. The PA Gaming Board is currently expected to announce the winner on December 20 in Harrisburg. The Harrah’s/Forest City and Isle of Capri licensing hearings are both scheduled for November 20, and PITG Gaming is scheduled for November 21.

HIGHLIGHTS
• Updated odds. We have decreased our current odds on the Harrah’s/Forest City proposal to 3-to-2 (40%) from 4-to-5 (55%). We believe the current offer for the company creates uncertainty surrounding the bid. We are increasing our odds on the Isle bid to 4-to-5 (55%) from 3-to-2 (40%), and the bid is now our favorite to win the license. The Isle bid, which includes the full build-out of a new arena for the Penguins at $290 mln, appears to be gaining steam in the wake of the new owners of the Penguins and the uncertainty raised by the HET LBO bid. We reiterate our odds on PITG Gaming at 19-to-1 (5%), as we still see it as a long shot given its lack of a strong brand name like Harrah’s, or the added kicker of the arena build-out contained in the ISLE bid.
• Private equity offer for Harrah’s. We think the recent offer by private equity firms Apollo Management and Texas Pacific Group to take HET private may hurt the HET/Forest City bid for the Station Square proposal. We think questions about the eventual ownership of Harrah’s and concerns that the amount of debt required to take HET private may curtail Harrah’s future capex spending may make awarding a license to HET riskier in the eyes of the regulators than it was previously.
• The Penguins and Plan B. The central issue from day one in the Pittsburgh race is building a hockey arena for the Penguins. The Penguins have publicly threatened from the beginning to move the team from the city if the Isle bid was not chosen. Plan B is a plan formulated by Governor Edward G. Rendell (D) in the event the Isle bid is not the chosen as the winner. The plan is a combination of funding from the Penguins, the chosen gaming operator, and the Gaming Economic Development and Tourism Fund. The way the plan works is the gaming operator contributes $7.5 mln annually over a 30-year period, which would fund a bond for the proposed $290 mln arena.
• Pittsburgh market opportunity. There will only be one Category II (stand-alone)
facility in the downtown section of the city. The Meadows Racetrack, which received a conditional gaming license on September 27, is about a half-hour drive southwest of the city. When we evaluate the large population of the city and compare it with similarly populated regional markets elsewhere in the U.S., we believe the market is very favorable. We expect the facility with 3,000 slot machines could do $375 in win per day per machine, which at margins of 25% could produce $100 mln in EBITDA to the chosen operator. We should note that we do not include the assumption that the November 7 referendum in Ohio is successful.