CEO: Plan has potential drawbacks
Boyd Gaming Corp., owner of 22 casinos in eight states in the U.S., may form a real estate investment trust. The REIT would enable the company to shift some of its casino holdings into a separate entity, according to the Las Vegas Review-Journal.
The decision “takes a considerable amount of time and thoughtful consideration, so this will not be a quick process,” said Boyd CEO Keith Smith during a third-quarter conference call with analysts. He cited ”various aspects of our capital structure” that would make ”value creation” through an REIT difficult to achieve.
Though shares of Boyd stock jumped almost 5 percent in value on the New York Stock Exchange after the announcement, some analysts preached caution. Brian McGill of Buckingham Research said the transaction “would be very complex given the capital structure.” More than 30 percent of the stock is controlled by company founder Bill Boyd and family members. Boyd also carries almost $3.5 billion in long-term debt. McGill said the REIT may not be realistic in the near term, given Boyd’s “leverage and ownership structure.”
REITs do not pay federal income taxes, but are required by law to distribute at least 90 percent of their taxable earnings to shareholders. Penn National Gaming established an REIT in 2013, spinning 21 of its 29 casinos into a separate unit. In March, a New York hedge fund acquired a 5 percent ownership stake in Boyd, the Review-Journal reported. At that time, analysts said the firm might try to compel Boyd to form a REIT.
As for third-quarter results, Boyd said it lost $15.1 million, or 14 cents per share, in the period that ended September 30. During the same quarter in 2013, the company lost $37.3 million, or 37 cents per share. Boyd Gaming’s overall net revenue in the quarter rose less than 1 percent to $738.8 million, with the Las Vegas locals market up 1 percent, and the Downtown Las Vegas casinos up 1.3 percent. Revenue declined in Boyd’s Midwest and South properties.
Smith called it “a solid quarter for our operations. Growth resumed in our Nevada business, as our Las Vegas Locals and Downtown Las Vegas operations both achieved positive comparisons.”
