Financial Risks Loom for New York Casino Bidders

The battle for casino licenses in New York City is reaching a fever pitch as the state government prepares to award three licenses for downstate casinos. This opportunity is considered one of the last untouched gaming frontiers in the United States, and major players like MGM Resorts International, Las Vegas Sands, and Wynn Resorts are fiercely competing for the lucrative licenses.

S&P Global Ratings has released a comprehensive report outlining the financial implications that successful bidders may face. The proposed projects range from $2 billion for expanding existing properties to over $5 billion for entirely new developments. The report suggests that the financial strain from this leverage could become evident within the next 12-18 months.

One of the primary concerns highlighted by analysts is the potential strain on corporate credit metrics as companies strive to establish a presence in the competitive New York market. Strong contenders like MGM Resorts International's Empire City Casino and Resorts World New York in Queens are rumored to be in the running, though nothing is confirmed.

Recent rumors have circulated about record-breaking licensing fees, with some suggesting that winning bidders could face fees as high as $1 billion each—twice the initially estimated cost of $500 million per permit. When accounting for construction expenses, operators like Las Vegas Sands and Hard Rock International might be looking at total investments of up to $6 billion and $8 billion, respectively.

Despite the substantial financial challenges, experts believe that dominating the New York market could offer a lucrative long-term payoff for victorious operators. However, the timeline for these developments is extended, with S&P suggesting that licenses may not be awarded until the second half of 2024. Significant capital spending isn't expected until 2025, given the complexities of building in New York and the ambitious scale of the proposed projects.