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Banc of America Lowers Argosy Gaming to 'Neutral'

Banc of America downgraded Argosy Gaming (AGY) to neutral from buy.

Analyst David Vas says the potential on Illinois gaming quickly turned from positive to neutral, and now is even potentially negative. He thinks the status quo could be the best case, and that a tax hike now is possible. Vas says support for Rep. Lou Lang's proposals (a tax rollback and capacity expansion) have faded, as Gov. Rod Blagojevich pledged to veto any expansion of gaming -- which lawmakers say would help solve the state's budget crisis.

Vas notes the governor's proposal to stop the spread of riverboat casinos and slot machines could cost Argosy $36 million in 2004 EBITDA (-13%), and 66 cents (26%) in 2004 earnings per share. He thinks the stock could trade into the mid-teens if the proposal becomes law. Also, Vas says if the status quo prevails, shares could return to the low mid-$20s.

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