Del Lago Casino: Credit agency warns of financial troubles

ALBANY — Less than a year since opening, the del Lago casino in the Finger Lakes is performing "substantially slower than expected" and faces the inability to cover its debt, a report from a major credit agency warned.

The scathing assessment by Moody's Investors Service is the latest to raise concerns about the $440 million casino in Tyre, Seneca County, that opened last February.

Del Lago was the largest of three upstate casinos that opened about a year ago, but it has underachieved, Moody's said.

"Given del Lago's current performance, Moody's is of the view that without a substantial improvement in revenue, del Lago will not be able to achieve a level of performance that can support its existing debt capital structure," Keith Foley, a senior vice president at Moody's, said in a statement Wednesday.

Moody's lowered the casino's bond rating and gave it a negative rating outlook.

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Underperforming casino

In October, the Albany Bureau for the USA Today Network estimated del Lago was on pace to be at least $100 million off its original projections of $263 million in its first year.

The Albany Bureau report found that while the three new upstate casinos were falling below initial estimates, del Lago was doing the worst.

Moody's offered a similar review, saying it had expected del Lago would ramp up to about $250 million in net revenue in its first year. But at its current rate, it will be at about $150 million.

"Despite the fact that del Lago Resort Casino opened on time and on budget and has substantially grown total gaming revenues generated in its primary market area, the property's revenue ramp-up is well below Moody's expectations," Foley said.

Additionally, the net win a day at del Lago — a casino standard that measures the amount of money left in the machines after payouts to winners — was $130 per its 1,956 slot machines in December, the lowest mark since it opened, records from the state Gaming Commission showed.

Comparatively, the Rivers Casino in Schenectady was at $207 per day in December, while Tioga Downs in the Southern Tier was at $171 per day.

Del Lago, owned by Rochester mall magnate Thomas Wilmot, has defended its performance, saying it takes time to build a clientele and pointing to the jobs and economic development it has created in the region.

“From many aspects, del Lago Resort & Casino has been a wonderful success story in less than nine months," Jeff Babinski, the general manager of del Lago, said in a statement in September.

"While our revenue in the first eight months has been below projections, we are confident that we are moving in the right direction."

There was no immediate comment Friday from the casino on the Moody's report.

Competitive market

Del Lago was awarded a gaming license in December 2014, beating out two other bidders in the Finger Lakes/Southern Tier region.

The casino, though, joined an already competitive gambling market — with three Seneca Nation casinos in the Buffalo area and three racetracks with video-lottery terminals in western New York, including Finger Lakes Racetrack less than 30 miles to the west.

Giving del Lago a casino license led to a cascade of events: Finger Lakes and Vernon Downs near Syracuse received lower tax rates for their racinos, and the Oneida Indian Nation added new casinos.

The Oneidas own the Turning Stone casino near Syracuse and added the Yellow Brick Road Casino in 2015. On March 1, they will open the Point Place casino in the region.

Moody's noted the "highly competitive nature of the market" as possibly impeding del Lago's "ability to support its capital structure."

"There are five gambling facilities, including four racinos and one Native American full scale casino within 100 miles of del Lago's location," Moody's report said.

Moody's also warned that Lago is a "single asset profile," meaning it is a company only supported by the casino.

"Lago is entirely dependent upon one casino to generate all of its revenue and cash flow," the report said.

"As a result, the company is subject to greater risks than a multi-facility and more geographically diversified gaming company."

Moody's, however, did point to some positives for del Lago, such as being the only full- scale casino between Rochester and Syracuse and having a favorable tax rate.

In October, Assembly Racing Committee chairman Gary Pretlow urged Comptroller Thomas DiNapoli to analyze the new casinos' performance, saying he is concerned they may ultimately seek state support.

"It is critically important that we have reliable and realistic long-term revenue projections — so we can prevent the recent gaming expansion from creating an arms race for more and more tax subsidies," Pretlow, D-Mount Vernon, wrote.