Sullivan County Democrat
Callicoon, New York
January 22, 2010 Issue
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PATRONS TRY THEIR luck at the slot machines at Monticello Gaming & Raceway.

Empire's struggles

By Dan Hust
MONTICELLO — Struggling to survive, Empire Resorts reports bad news on several fronts.
According to a filing last week with the Securities and Exchange Commission, the company that owns and operates Monticello Gaming and Raceway may be unable to repay a $7.15 million balance to the Bank of Scotland – due in May – or repurchase up to $65 million in senior convertible notes, which the holders have a right to cash in this July.
“We do not presently have a source of repayment for this credit facility or for these notes, and our operations will not provide sufficient cash flow to repay these obligations,” the company admitted in the filing.
“We have a restructuring problem,” Empire Vice President Charlie Degliomini told the Democrat yesterday – though he pointed out it’s not that different from the struggles facing companies across the country.
Continuing a trend in recent years, Empire’s revenues fell by $8.4 million in 2008, or 11 percent, much of that due to reduced use of its video lottery terminals, which it blames on increased competition from the Yonkers racino and full-fledged casinos in Pennsylvania. Gaming revenue itself was down by 10 percent from this time last year, while racing profits dropped by 22 percent.
Empire has been pinning its hopes on the “Entertainment City” project at the former Concord Resort Hotel in Kiamesha Lake, but developer Louis Cappelli, citing the extremely difficult credit market, has slowed his plans while he awaits hundreds of millions of dollars to finance the $1 billion project.
If the agreement holds (and Cappelli actually restarts construction), Empire will relocate its gaming and racing venues to the Concord, as part of a new hotel and convention center.
“However, it is not expected that the conditions to the closing of the transaction [with Cappelli] will be satisfied without significant modifications, and no assurances can be given that the parties will be able to find mutually satisfactory alternatives that would enable the consummation of a new agreement,” cautions Empire in its filing.
Degliomini said talks are going well with Cappelli, who is a significant shareholder in Empire, and negotiations are also under way with the Bank of Scotland and the holders of the convertible notes. Still, “we’ve done some significant belt-tightening,” he said, referencing operations and personnel reductions.
The negative news precipitated a drop in Empire’s stock value yesterday, falling from 88 cents per share at opening to 41 cents per share in early afternoon trading.
The situation remains critical for the company, as it grimly admitted in its SEC filing that any default would “permit the lenders under such credit agreement or other agreement to accelerate the debt outstanding thereunder and, if such debt is not paid, to enforce security interests in the collateral securing such debt or result in our becoming involved in an insolvency proceeding.”

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