Boyd Gaming Delays $4 Billion Project Blames Partners and Economy

Boyd Gaming Delays $4 Billion Project Blames Partners and Economy

Boyd Gaming announced on August 1, 2008 that it was delaying construction on its $ 4 billion hotel project on the strip; in addition it has stopped its dividend and is buying back $100 million in stock. Boyd's stock had been declining for the last year from a high $45 in October to a low of $7 on July 12, 2008. After the announcement the stock, which had closed the day before at $10 opened at $13.34 and closed at $12.01, a twenty percent increase. The increase in the stock price was the market's approval of the decision.

The decision to delay construction was based on two factors: the inability of the Morgans Hotel Group and General Growth Properties to obtain financing and a slow down of Boyd's gaming business.

Fitch Ratings has kept Boyd Gaming credit rating at BB, saying that the company remains stable for the short term. Fitch noted that the project's delay was a near-term credit positive by significantly reducing the company's capital spending outlook. Boyd is expected to spend another $200 million-$300 million in wind down costs on the Echelon project.

Fitch went on to note that Boyd Gaming is seeing pressure on its operating results in Indiana from a nearby tribal property, Four Winds, plus Harrah's is opening a new Horseshoe Hammond riverboat in 2008. In Las Vegas the Eastside Cannery's opening in 2008 is expected to put pressure on Boyd's Sam's Town property. In Atlantic City the Borgata is being impacted by increased competition in Pennsylvania and New York.

The company did report a drop in revenues in the 2nd Quarter of 2008 with declines in Las Vegas of 6.3%, in the Midwest and South of 15% and flat revenues at Borgata.

Echelon will most likely have its opening delayed until 2012.

John Laub is the President to the CEO-CFO Group.

1. "Company Delays Construction of Echelon. Board Authorizes $100 Million Share Repurchase Program. Company Exceeds Analyst Consensus Estimates." Company Press Release. PRNewswire. August 1, 2008.

2. "Boyd Gaming Suspends Construction Work on Echelon Project." The Las Vegas Review Journal. August 1, 2008.

3. "Morgans Hotel Group Issues Statement Regarding Echelon Project in Las Vegas."
Company Press Release. August 1, 1008.

4. "Boyd Gaming Climbs After Delaying Echelon Las Vegas (Update3)." Beth Jinks. Bloomberg. August 1, 2008.

5. "Boyd Delays $4.8 Billion Las Vegas Resort." Tamara Audi. The Wall Street Journal. August 2, 2008.

6. "Fitch Affirms Boyd's 'BB-' IDR; Outlook Stable Following Echelon Delay." Company Press Release. Business Wire. August 7, 2008.