Tuesday, June 29, 2010

Suppose They Gave a Party ...

Tom Precious of the Blood-Horse is reporting that Delaware North, one of the six registered bidders for the long-delayed Aqueduct slot machine contract, is pulling out of the bidding. Bids are due at 4 pm today in the latest attempt to name a racino operator.

Delaware North is one of the more experienced slot-machine operators among the six potential bidders, with some 10,000 slot machines scattered across the US, including the racino at the upstate New York Finger Lakes track. Presumably, the company knows how to do its sums before making a bid, so its last-minute decision to pull out is, well, troubling.

Although no one at Delaware North was speaking publicly, Precious cites unnamed sources as saying that the reasons for the pullout included the 1% cut in operator fees included in the latest version of the New York state budget, the requirement that the winning bidder pony up $300 million BEFORE negotiating a final agreement with the state, and doubts as to whether New York State can manage to borrow the $350 million it's supposed to come up with to finance construction of the Aqueduct racino. Sound like good reasons to me, although the $300 million up-front payment has been part of the deal from the beginning of this round of bidding, so there's no cause for surprise there.

The real reason, it seems to me, is likely that Delaware North has spent the past month observing the New York state government in action, and what it's seen has certainly not been encouraging. The state may indeed have a budget sometime later today, but, if I were an investor about to put $300 million into a venture dependent on the Albany Follies, I'd certainly be having second thought.

Still three and a half hours before the bidding deadline. Wonder how many others among the bidding groups -- Penn National, S.L. Green Realty Corp., Empire City Casino/Yonkers Raceway, Genting New York, and Clairvest Group -- will also have second thoughts. Could be a pretty small party by the deadline.

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