Thursday, April 24, 2008

SRBOC Starboard

There is other news I suppose. Something that has been in the news, and that was mentioned here, has to do with the financing of the Majestic Star Casino. Don Barden is saying that increasing finance and construction costs are pushing the cost of the project from the $400mil range to the $600-$700 mil range or more, with some Swiss financing (and can someone tell Reuters of all places that it is Pittsburgh with an H!). Some question whether he can raise that money, he first said it was not an issue, but today he is saying there is a "conspiracy" trying to prevent him from getting the financing he needs for the project. Conspiracy is a strong word in the legal sense.

Hard for me to address the conspiracy allegation. I have a more fundamental question that does not really depend on whether he can get financing. The underlying question is does he want to? If this project was anticipated to cost around $400-$450 mil then you have to believe there was some profit possible. If the project is now significantly more expensive it seems only 1 of two things has to be true doesn't it? One is that it was always a much more profitable venture than any of us imagined and even at $750+ mil in startup costs it is still worth going forward. That would be amazing if true. The alternative: it was a profitable venture at $450 but will not be this higher cost. Given that Don Barden says he is proceeding, you have to think the former is true and that there was a lot more potential profit on the table than was being talked about. That or maybe these latest allegations of conspiracy are really foreshadowing a more fundamental problem that could put the brakes on the project. We would call that chaff.... hypothetically of course. If true, what then?


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