For Iowa casino patrons, it’s a rough time as the state does not allow internet gaming. The state-mandated shutdown due to the coronavirus could be even worse for Iowa casino operators, however.
Two such operators don’t have cash reserves for more than 10 months, according to a new study. While that wouldn’t necessarily mean the end of the operators’ Iowa properties, it could affect the long-term situations of employees at three facilities in the Hawkeye State.
Which Iowa casino operators might be running on fumes?
The Macquarie Research study included Boyd and Penn National gaming companies, which collectively operate three Iowa casinos. Those are:
- Ameristar Council Bluffs — Penn National
- Diamond Jo Dubuque — Boyd
- Diamond Jo Northwood — Boyd
Although Boyd operates twice the number of Iowa properties as Penn National, it is better situated for the shutdown imposed by Iowa Gov. Kim Reynolds and others. That’s because of the numbers revealed by the study.
The study says Boyd is burning through $3.2 million daily because all of its properties nationwide are closed. At that rate, Boyd has reserves to last about 9.4 months.
Penn National, on the other hand, is losing $6.4 million per day. At that rate, the study says, Penn National will be out of cash in about 5.2 months.
Obviously, shutting down all of its properties either voluntarily or because of government orders cuts off revenue streams. The expenses come from several sources.
One of the most significant expenses for these companies may also provide some relief. There are some fixed expenses as well, however.
How casinos’ debtors can provide some relief to properties
The banks that have helped Boyd and Penn National finance their retail operations represent a significant ongoing cost. While it’s uncertain how much debt servicing liability both companies carry across their entire portfolio of assets, those assets are key in this situation.
Holding those assets provides Boyd and Penn National the necessary collateral to negotiate notes on debt with the banks that hold those notes. At the same time, creditors are unlikely to seize those assets because they are themselves ill-equipped to operate casinos.
If debtors postpone payments or waive fees, that could buy casinos more time. One of the prominent fixed costs is also running on borrowed time, however.
Different operators around the country have reported varying policies on continuing to pay employees during the shutdown. Boyd promised hourly employees a week’s worth of wages and two weeks for salaried employees.
Penn National has already laid off employees, some with limited severance. Laid-off Iowa casino employees can qualify for unemployment insurance payments after they exhaust any banked paid time off.
New federal guidelines have afforded Iowa additional flexibility with its unemployment insurance program. That could allow casino workers who might not have qualified before to access the system now.
The longer the shutdown lasts, however, the more likely it is that casino workers may not have jobs to go back to when the casinos reopen. Operators may look to rebuild their reserves by keeping labor costs low.
Ultimately, the duration of the shutdown will prove costly to operators regardless of how long it lasts. It’s just a matter of how expensive.
