Genting New York LLC’s (GenNY) bid for the Aqueduct racino in New York City has hit a potential roadblock as a US state Supreme Court has ordered a halt to the bidding process for the project.
According to US press reports, the New York Supreme Court had on Wednesday ordered a halt to the bidding process for the combined racetrack and casino project, so that it may consider the lawsuit against the state, filed by the winner in the previous round of bidding.
Aqueduct Entertainment Group (AEG) is suing the state for revoking the deal to build the casino complex. AEG was selected in January this year to build the complex, but New York governor David Paterson announced in March that the state had “officially withdrawn its support for AEG” to develop and operate the facility.
The New York Lottery Division, which is in charge of the bidding, declined to comment, with its spokesperson noting that the agency had not been officially notified of the lawsuit or the temporary restraining order.
GenNY, which is a subsidiary of Genting Malaysia Bhd, had emerged as the sole bidder for the project when the two other remaining ones — one led by SL Green Realty Corp, Manhattan’s largest office landlord, and the other by Penn National Gaming Inc, were rejected by the Lottery Division, as announced on July 6.
GenNY’s bid is said to feature renovations to the Aqueduct Racetrack to house 4,500 slot machines, a two-storey 450-seat food court, 34,000 sq ft of conference and business meeting facilities, an entertainment centre and parking facilities for 2,200 cars, according to a US media report.
An analyst covering the Genting group at a Kuala Lumpur-based brokerage said at this stage, “if the process stops here and Genting does not win anything, all the group has lost is the US$1 million (RM3.2 million) entry fee”.
GenNY along with other bidders had in June submitted the entry fee to the New York Lottery Division.
The analyst said the US$1 million would not have much impact on Genting Malaysia, which posted a RM1.32 billion net profit on RM4.99 billion revenue for its financial year ended Dec 31, 2009.
However, she said the racino project was significant to the group’s performance “if they manage to secure it”.
“There are not enough details on the project to make projections, but it will definitely have to be taken into consideration if Genting Malaysia were to win the project,” she said.
A concern would be the racetrack operations that would come with high costs. Racetrack operations in Malaysia and also in the US were usually loss-making due to these costs, the analyst said.
However, the slot machine section was likely to be profitable as it was “a high return on equity and an asset-light business” similar to the business of number forecast totalisers in Malaysia, she added.
Meanwhile, ECM Libra Research analyst Yin Shao Yang was not surprised that the Aqueduct racino project had hit a snag.
“This redevelopment project has been politicised and held up for almost 10 years already, so this is not totally unexpected,” he told The Edge Financial Daily.
He also cautioned that management had already said that being a sole bidder did not guarantee that GenNY’s bid would be successful. Genting Malaysia slipped eight sen to RM2.68 yesterday, with 5.43 million shares done, on news of the latest development.
This article appeared in The Edge Financial Daily, July 15, 2010.
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