Pinnacle Entertainment rebuffs investor proposal for REIT spinoff

LAS VEGAS — Regional gaming operator Pinnacle Entertainment, Inc. on Wednesday dismissed an investor proposal to spin-off the company’s 14 casinos into a real estate investment trust.

During a conference call to discuss the Las Vegas-based company’s first quarter earnings, Pinnacle officials said they are focused on consolidating the casinos the company acquired last year in its $2.8 billion buyout of rival Ameristar Casinos.

Pinnacle CEO Anthony Sanfilippo said the company wants to reduce its $4.35 billion in debt, much of which was taken on because of the Ameristar transaction.

However, Sanfilippo said the company might consider the idea in the future. Earlier this month, Orange Capital, a New York-based investment fund, suggested the REIT split, which is similar the split performed last year by Penn National Gaming, as a way to increase shareholder value.

REITs don’t pay federal income taxes, but return 90 percent of their taxable earnings to shareholders.

Sanfilippo said Pinnacle was keeping its options open in regards to continued expansion. He told analysts it was unlikely the company would pursue a potential casino development in Japan but was interested in one of the four available casino licenses in upstate New York.

Pinnacle submitted a refundable $1 million application fee to join the New York process, even though the company hasn’t designated a site preference.

“It has to be compelling to move forward and compete for a license,” Sanfilippo said.

Pinnacle said results in the quarter, which ended March 31, were helped by inclusion of the Ameristar properties, which doubled the size of the regional company.

Pinnacle reversed a first quarter loss from a year ago by reporting net income 0f $19 million and earnings per share of 31 cents. A year ago, the company lost $85.4 million or 31 cents per share. Net revenue grew 100 percent to $532.8 million.

Pinnacle conducted the earnings call from its Belterra property in Northern Indiana. On Thursday, the company opens the remodeled $209 million Belterra Race Track and Casino in nearby Cincinnati. Sanfilippo said the properties will address two different audiences.

Analysts have worried about diminished gaming revenue from regional gaming markets over the past few months. Pinnacle’s results, however, buoyed the company in the eyes of the investment community.

“We expect these results to help Pinnacle remove itself from others in regional gaming who have fewer margin opportunities,” said Macquarie Securities gaming analyst Chad Beynon. “Pinnacle’s strong portfolio of assets continues to outperform the market.”

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