Disclosure: I own shares of NYNY
Wednesday, August 7, 2019
Empire Resorts: Going Private Offer, Possible Bump?
Empire Resorts (NYNY) is a one property newly built casino resort ("Resorts World Catskills") located about 90 miles from Manhattan in the Catskills region of New York. The Resorts World branded casino cost ~$1B to build and opened in 2018, it has struggled to ramp up in the year or so that it's been open. Empire Resorts is 86% owned and controlled by Malaysian billionaire KT Lim, chairman of the Genting Group, via a family trust ("Kien Huat"). On August 5th, Kien Huat made an offer of $9.74 in cash per share for the remaining 14% it doesn't already own, shares are trading for ~$9.25 today (shares are pretty illiquid). While that's not a tremendous return -- a 5.3% spread (but still good enough) -- this has the possibility of following the path of similar controlled buyouts I've written about in TRK and VLTC where to placate the independent directors (and perhaps save them from shareholder lawsuits) the controlling shareholder bumped up the bid once or twice before entering into a definitive agreement. From a 10,000 foot view, this feels a bit opportunistic, the resort just opened, casinos often take a little time to season and develop a loyal clientele, sports betting is being rolled out in New York state, and the corporate structure is a little strange as it probably makes sense for this property to be wholly controlled under the Genting umbrella. Just all feels a bit opportunistic and maybe leads to a small bump.
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https://midhudsonnews.com/2019/08/10/empire-resorts-considers-filing-chapter-11-bankruptcy/
ReplyDeleteThoughts?
Ugh, yeah seems like the press taking going concern language in the Q (obviously not great) a bit far. Assuming Genting knows the financial condition as a controlling shareholder before making the bid, but certainly puts the independent committee on their heals, limits negotiating power, now we just hope to accept the bid on the table.
DeleteThe new spread (~19% on the close yesterday) might make up for that though. The cynic in me wants to think that the bankruptcy threat suits the majority owner pretty well .. To me it looks more attractive than it did last week. Still, difficult for me to judge all parts of this.
DeleteCaught with my pants down a bit on this one. But it is part of a larger restructuring with some of the equity moving to Genting Malaysia after the close of the deal. The debt is mostly a term loan that's widely syndicated, would they risk losing their 86% equity? They do own the preferred (being used to fund the losses currently, don't love that, slowly destroys the equity) and some of the junior notes, hard to tell where the control would move in a restructuring.
DeleteNo disaster for you. Final deal is on the table. I bought a few shares last week - still very small position. Thanks for bringing this up!
ReplyDeleteWelcomed news this morning, sweated that out a little too much for a few hundred dollars but didn't want to average down and then get wiped out. I sold and happy to move on, glad it worked out for those that took advantage of the dip.
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