September 21, 2015
By Brian Chappatta at Sun Herald
Mississippi is selling its first bonds backed by gambling taxes after its share of the winnings fell to the lowest since 1997, two casinos closed and its neighbors began looking at expanding into the business.
Investors may still like the odds.
The $200 million of bonds carry Standard & Poor's fifth-highest credit rating because the state's gaming revenue covers the debt service 10 times over, even though it's fallen almost 30 percent from the 2008 peak.
Potential competition from neighboring states, along with closures of a Harrah's casino in Tunica and another on the Gulf Coast, may lead the state to dangle higher-than-average yields to draw buyers to the offering on Wednesday, said Burt Mulford at Eagle Asset Management.
"There has been a trend of decline in this sector in terms of state gaming revenue," said Mulford, a manager of tax-exempt funds for the St. Petersburg, Fla.-based firm, which holds $2.4 billion of municipal bonds. "It'll come at a very wide spread, at least initially, and because it's a name a lot of managers don't own, they're going to want to add it."
The money that originally was set aside to be used for road construction in counties with casinos will now go to repair bridges throughout the state.
Mississippi joins states across the U.S. that have seen their share of gambling money dwindle as others expanded the industry to bring in cash after the recession. Last year, casino revenue dropped in 10 of the 12 biggest gambling states, including Mississippi, according to data compiled by the University of Nevada, Las Vegas.
With more than $2 billion in revenue from 28 casinos, Mississippi's industry ranks sixth nationwide. That's drawn the attention of its neighbors: Alabama and Georgia pushed to legalize gambling in the last legislative session, said Jon Griffin, who tracks the issue for the National Conference of State Legislatures in Denver.
Alabama sought to establish a lottery and authorize casino gambling. Georgia lawmakers proposed a constitutional amendment to overturn its casino ban. Neither effort succeeded.
"Legalized gaming in Alabama could severely affect gaming revenue" because Mississippi's Gulf Coast casinos drew 2.5 million visitors from its neighbor in 2014, according to the offering statement. Gambling on the Mississippi River, a center of the state's casino industry, has already suffered from expanded options in Arkansas, with visitors from the state and Tennessee declining more than 50 percent in the past four years, the statement says.
In addition to the two casinos that closed last year, the Isle of Capri Casino in Natchez will shutter next month, according to bond documents. Offsetting that, Scarlet Pearl is set to be built by the end of 2015 in D'Iberville with more than twice as many slot machines and seven times as many table games.