Penn National Gaming announced Friday it is selling its Tropicana Las Vegas’ buildings and acreage in exchange for $337.5 million worth of “rent credits” as it faces the grim economic reality from the coronavirus pandemic. It is also putting some 26,000 US employees on unpaid furlough.
There is no word yet on what will happen to the M Resort located in Nevada. But Penn Gaming, which operates M, says it may take “further steps” to reduce its company-wide expenses. Gaming and Leisure is a spinoff of the company, the Las Vegas Record-Journal said.
The transaction will “help mitigate the financial impact” of the viral outbreak, Penn National explained in a statement. “Like many others in the gaming and hospitality sector, we are making difficult decisions to help preserve our liquidity and ensure a brighter future for our company’s team members, customers, shareholders, and other key stakeholders,” Penn National CEO Jay Snowden said in Friday’s statement.
While this transaction will help to relieve liquidity pressure in terms of rent obligations, we are committed to taking further steps to reduce our ongoing operating expenses,” Snowden added. Penn National will keep on operating the Las Vegas gaming property.
Penn National’s 41 casinos, which are in 19 states, are shuttered due to the outbreak. The company also has a 36 percent stake in Barstool Sports.
Penn National stressed it wants financial liquidity at this time, and the latest deal is “creative,” Snowden said.
Workers Furloughed, Executives Get Pay Cuts
In addition, Penn National announced that about 26,000 of its employees, which works out to most of its staff nationwide, will be furloughed starting on Wednesday. Altogether, the company will continue operating with fewer than 850 employees.
Also, executives will see pay cuts starting on Wednesday. Board members agreed to temporarily give up compensation, the Record-Journal said.
“This decision was extremely difficult to make for all of us at Penn,” Snowden said about the furloughs. “We are extremely motivated and focused on reopening our properties as soon as it is safe and legal to do so…. We are committed to doing all we can to help our affected team members get through this.”
Also, as part of the new deal, Penn National will get a new lease for a future casino in Morgantown, Pennsylvania with Gaming and Leisure Properties. Penn National suspended construction on the planned venue at the Morgantown location because of the COVID-19 pandemic.
Under the new deal, Penn National also has an option to acquire the operations of Gaming and Leisure Properties’ Hollywood Casino in Perryville, Maryland in the future.
Gaming and Leisure Properties is a Pennsylvania-based real estate investment trust (REIT) that was incorporated in 2013. It mainly acquires, finances, and owns property that is leased to gaming operators.
It has some 44 gaming venues and related properties located in 16 states. Beyond Penn National, tenants include Casino Queen, Eldorado Resorts, and Boyd Gaming Corporation. It also owns and operates Hollywood Casino Baton Rouge.
Like many other companies impacted by the outbreak, Penn National has withdrawn its financial guidance. Company executives are next scheduled to provide details on its finances during a May 7 quarterly earnings call.
Penn National is the largest regional casino operator in the United States. As of the close of Nasdaq trading on Friday, the company’s stock was selling for $11.77.
Casino.org reached out to M Resorts and Penn National for comments, but company officials did not immediately respond. The company has not made statements on future of M.
Worker Relief Fund, Medical Supply Donations
To assist its workers, Penn National has set up an employee relief fund to help needy workers and the communities in which they live. It totaled about $1.2 million as of Friday. Among those who donated to the fund were Snowden, other top executives, and company board members.
Also, Penn National properties have donated more than 45 tons of food to local food banks and homeless shelters located in communities where company casinos are situated. The properties also donated thousands of unused masks and surgical gloves to first responders and health-care professionals.