Philadelphia's Activists Beat Proposed Casinos Into Junk

Foxwoods Tribe and Billionaire Neil Bluhm Now Facing Junk Credit Ratings

For Immediate Release

Nearly three years after obtaining their state gambling license, proposed Philadelphia casinos Foxwoods and SugarHouse have yet to obtain the necessary permits to build in the city — and now face increasingly desperate financial conditions. The delay in construction is due in large part to the mounting pressure from grassroots neighborhood organizations including Casino-Free Philadelphia, which has successfully prevented the construction of predatory casinos in residential communties and will continue to do so.

The Proposed Foxwoods Casino: 'Dire Financial Condition'

Foxwoods and local investor Ron Rubin want to build a slots parlor in Philadelphia. First proposed for the Delaware River in Pennsport, they have now indicated an intention to open a casino in the heart of the city on Market Street, on the edge of Chinatown. Facing angry citizens at every turn, the casino has not been able to obtain building permits and has been keeping very quiet about its intentions.

Now comes news that the Foxwoods tribe is in "dire financial condition" according to its own chairman, hemorrhaging money from its newly-finished $700 million expansion in Connecticut — just as the economy hits bottom. The tribe is in disarray and has no plan for how to survive. Yesterday, Standard & Poor’s reduced the tribe's credit, putting it on a "credit watch." The tribe is now at risk for defaulting on its loans.

"Casino-Free Philadelphia supporters are beaming because Foxwoods is scheduled to appear before the Pennsylvania Gaming Control Board on Friday and explain why it hasn't opened its casino yet," said Jethro Heiko, a founder of the group. "Foxwoods is in financial ruins and the board should put a stake through the casino's heart by revoking the gaming license," Heiko said.

The Proposed SugarHouse Casino: Junk Bond Status

SugarHouse casino's main investor is Chicagoan Neil Bluhm, who has tricked everyone into thinking he could do no wrong when it came to successful casino development. Now times are different, and Forbes magazine recently pushed Bluhm far down in its wealth rankings . He's lost 30% of his net worth in the past six months and Bluhm's "casino valuations [are] languishing as [the] economy tanks."

The SugarHouse casino itself — proposed for the historic Delaware River waterfront in the Northern Liberties and Fishtown communities of Philadelphia — is currently blocked by lawsuits and controversy and turning out to be a very risky bet. The new financing consists of a $180 million loan requiring SugarHouse to pay a whopping 12.9% interest rate. The lenders, to protect themselves in the event of a default, are requiring that Bluhm put up both the gaming license and the property as collateral.

Moody's Investors Service has given the $180 million loan and its probability of default "junk" status (PDF) — too risky to justify investment. According to Moody's, a junk rating is appropriate because of the following negative factors:

1. the start-up nature of the project
2. all risk is concentrated in a single property — for example, if traffic on Delaware Avenue is not managed well, SugarHouse's projected revenues will be at risk
3. the expected gambling competition in the area — Philadelphia Park casino's expansion, Valley Forge's slots parlor, Sands Bethlehem and the Mt. Airy casino
4. the economic recession continues to keep many people out of casinos

"What will happen when SugarHouse defaults on the loan and the lenders foreclose on the gaming license and the property?", asked Lily Cavanagh, an organizer with Casino-Free Philadelphia. Bluhm is currently petitioning the Pennsylvania Gaming Control Board to approve SugarHouse's new financing package and to substitute a new corporation to hold the gambling license.

"The board should conduct backgrounds checks on all the lenders — because when Bluhm goes belly-up, the lenders will be holding the license and, most likely, a vacant piece of land," Cavanagh said.

Casino-Free Philadelphia's mission is to stop casinos from coming to Philadelphia and close any that open. The benefits of casinos can never outweigh the social and economic costs from an industry reliant on addiction to survive. Visit us online at www.CasinoFreePhila.org.

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