Casino Financing - DodgeBoard.com

Mr. Omnipotent · #1 (**permalink**) 09-04-2008, 10:54 AM

Hmmm, looks like Butler is still scrambling to find money to fund their project. Wonder what's going on. Did they have a funding source back out on them?

Hutchinson News Online

Clueless · #2 (**permalink**) 09-04-2008, 01:32 PM

Quote:

Originally Posted by Mr. Omnipotent

Hmmm, looks like Butler is still scrambling to find money to fund their project. Wonder what's going on. Did they have a funding source back out on them?

Hutchinson News Online

Sort of the reverse - Butler abandoned a prospective capital partner - that caused the problem.

Tuesday, Butler provided the Review Board with details of their capitalization. Butler National has invested $10 Million in the project, including their privledge fee, land and organizational-design costs. They have an additional $17 Million in capital investment commitments from 5 groups (Larry Woolf, Douglas Smith, Christopher Schudy, Fry Pond, L.P. and Sadler Group), for total current equity of $27 Million.

Consultants suggested equity of 20-35%. Butler is $7 Million over 20% and $8 Million under 35%. Their project manager told the board the remaining $8 Million will be confirmed to the board before their vote on the 19th.

In addition, Butler provided evidence of a firm loan commitment from Kaw Valley Bank (all Kansas' banks) of $20 Million for the first phase and a 'Highly Confident' letter for an additional $50-60 Million. In addition, Butler provided a letter with indicative terms from Wells Fargo for $45 Million and a letter of intent from Wells for an additional $60-80 Million. Last, they provided a letter of intent from Marshall Investments of $110 Million.

All of this has not received the final review by the consultant, Prof. Mills.

From my review, I would not describe their capitalization efforts as "scrrambling" - but it does indicate what they have accomplished in the last six weeks after abandoning a prior offer.

Conversely, Consultant Mills stated that while Dodge City Gaming has sufficient investor net worth's to assure development, that combined the investors did not have the $30 Million capital available from liquid assets. Also, their was discussion that they have not provided evidence of debt financing yet.

Butler announced they would not build the temporary as proposed earlier. Instead, they intend to start constuction of a portion of the permanent casino and be open in 10 months. They will build the front elevaton of the permanent casino and about 45,000 sq ft. Their report said the 150 seat cafe & Buffet will be built in this initial phase, instead of later. Their reasons given were that the 'Brand risk' was too great and that "interim" raises skepticism that this is all there is.

Butler reported their phase-2 permanent facility(including hotel, convention, spa, pool and additional food-beverage) would open within 38 months of license. Their project manager said "some think a metal building is adequate, we don't".

eunuch · #3 (**permalink**) 09-04-2008, 06:51 PM

The board should assess the original proposals. Not what has been added. How many chances should a developer have? In my opinion--one.

Clueless · #4 (**permalink**) 09-05-2008, 08:07 AM

Quote:

Originally Posted by eunuch

The board should assess the original proposals. Not what has been added. How many chances should a developer have? In my opinion--one.

I agree completely - however, that's not the way the board has handled its review process.

Clueless · #5 (**permalink**) 09-05-2008, 08:24 AM

I can guarantee that Butler would accept the terms of being judged only on what was presented in the original applications as of December 27, 2007.

Mr. Omnipotent · #6 (**permalink**) 09-05-2008, 09:43 AM

Thanks Clueless for the update. Guess that I still have questions. Even though you say that it is being worked out, the news article notes,

"However, Mills said he had not yet verified the group's capability to provide the cash. Smith said that information would soon be forthcoming and outlined a scenario in which Butler National has the money to proceed with the project.

But several board members, including chairman Matt All, said they still had questions about Butler's proposal."

Scrambling does seem to be the right word. Butler has had working on this project for how many months? Here it is at the stroke of midnight, and information on their financial capability is "forthcoming"? Why is the board still having questions after what was presented? Does this sound like a well-managed development/business plan?

To me it raises questins about their ability to close the deal on any aspect.

Clueless · #7 (**permalink**) 09-05-2008, 10:39 AM

Quote:

Originally Posted by Mr. Omnipotent

Thanks Clueless for the update. Guess that I still have questions. Even though you say that it is being worked out, the news article notes,

"However, Mills said he had not yet verified the group's capability to provide the cash. Smith said that information would soon be forthcoming and outlined a scenario in which Butler National has the money to proceed with the project.

But several board members, including chairman Matt All, said they still had questions about Butler's proposal."

Scrambling does seem to be the right word. Butler has had working on this project for how many months? Here it is at the stroke of midnight, and information on their financial capability is "forthcoming"? Why is the board still having questions after what was presented? Does this sound like a well-managed development/business plan?

To me it raises questins about their ability to close the deal on any aspect.

Mills did not have details of the investment group, nor their financial statements, in order to assure the Board of Butler's viability. I would hope Mills will have that information and opinion by their next teleconference meeting. Not all of this is Butler's doing. For instance, financial statements of Woolf and Smith (who comprise over 75% of capital infusion to date) were filed with Lottery in Sept. 2007 but never supplied to the consultants. Why? Recent document filings with the Kansas Racing & Gaming Commission have not been supplied to Consultants? Why?

I agree it is late in the game for these issues to still be unresolved. However, you don't address the point that both sides have some funding issues. Mills stated clearly that the DC Gaming investors did not have sufficient liquid assets to meet the capital requirements and that most of their assets were in non-liquid or non-marketable securities. Obviously they can borrow, but no debt financing has been provided. What do you say about that?

I can't agree with your conclusion that they don't have the "ability to close the deal on any aspect" I think that's a sophomoric analysis at best.

Maybe you can shed light on why some of these issues were raised:

One of the board's questions was whether Butler was changing their contract by building a portion of the permanent facility - instead of a separate temporary building - and they want legal opinion. Does that say - 'even if it's not the best plan, you have to build what you said you would build'. So Butler has to hire attorneys to address that issue.

The board is concerned that Butler's casino is more expensive that DC Gaming's. Apparently, the finish quality is higher (because sq feet is similar). Butler's architects and general contractor costed the project down to the closets. But, how are they suppose to know what DC Gaming has done? So, Butler is re-estimating for the board.

lurker · #8 (**permalink**) 09-05-2008, 11:53 AM

Long-long ago, in a land not far away, some locals thought it would help tourism if Boot Hill could provide some form of 'historical gaming' to further provide a historical experience to her visitors.

She went to Governmentium to seek permission for her humble desires.

Governmentium thought long and hard about this and eventually decided it would be best if Governmentium (instead) owned a casino somewhere away from the ruins of Boot Hill.

It was decided the(ir) casino should be of stature and elegance beyond the reach of mortal SW Kansans, so an entry barrier was legislated to preclude mere men from involvement....

but former Attorney Generals could...