Hard times for Empire Resorts

Security commission filing questions survival

By FRITZ MAYER

MONTICELLO, NY — The racino in Monticello is earning less money each year. Additionally, a report from the company that owns it said it might not be able to survive. Empire Resorts put forward the information in an annual report filed on March 13 with the Security and Exchange Commission (SEC).

According to the report, earnings from the racino in 2008 were $6.2 million, which represents a decrease of about 10 percent from 2007. Revenues from the harness racing part of the operation, meanwhile, totaled $1.8 million, a drop of about 22 percent from 2007.

The report says the drops are due, in part, to increased competition from the racino at Yonkers Raceway, and also from new gaming facilities in Pennsylvania.

Another reason for the loss in revenues, according to the report, is likely related to the challenging economic environment. Patron visits in the 2008 fourth quarter dropped nearly 20 percent from 2007. Overall, the company reported losses of $9.5 million in 2008, which was up from $7.5 million in 2007.

Empire also has some significant loan payments coming due that it might not be able to make. A loan from the National Bank of Scotland matures in May, and the gaming company said that it might not be able to make the $7.1 million payment due at that time. Therefore, the survival of the company depends on its ability to negotiate a renewal of the loan or an extension of the due date. Other notes that the company is obligated to repay come due in July.

The company said that it is pursuing plans to work out a way to meet its obligations. However, “there is no assurance that we will be successful in obtaining financing. These factors, as well as continuing net losses and negative cash flows from operating activities, as well as an uncertain economic environment, raise substantial doubt about our ability to continue as a going concern.”

Moreover, the company’s plan for future growth is not looking very healthy either. Empire’s partnership with Concord Associates and developer Louis Cappelli was intended to inject new life into the enterprise by blending the company’s gaming operations into a new $1 billion facility dubbed Entertainment City, which was billed as a state-of-the-art resort destination with many amenities.

But, part of the funding for the facility was to come from the state, based on the condition that Cappelli was able to line up $1 billion in investment funding. So far, that has not happened and work crews have been pulled off the job.

Cappelli has been quoted in news stories saying he has firm commitments for $550 million in funding but that leaves a long way to go. He is trying to raise the balance of the funds by selling bonds, a difficult thing to do in the current economic environment.