Creative Casinos LLC, owned by former Pinnacle Entertainment Inc. (PNK) Chief Executive Officer Daniel Lee, hired Morgan Stanley (MS) and Jefferies Group Inc. (JEF) to raise about $485 million to build Louisiana’s final casino, said two people familiar with the situation.
Closely held Creative Casinos plans to build a $400 million project called Mojito Pointe in Lake Charles, next to Pinnacle’s L’Auberge du Lac casino resort. The New York-based banks are seeking loans and about one-third equity from investors, said the people, who wouldn’t be identified because details of the arrangement aren’t public. The amount includes funds to pay interest and costs during construction.
Lee will sign a construction agreement with builder W.G. Yates & Sons Construction Co. today, he said in a telephone interview. He confirmed the banks were working on funding and declined to comment on terms.
Lee won the state’s 15th riverboat license in February, and it was supported by local voters in April. Pinnacle, the owner of seven U.S. casinos, surrendered the license last year after new CEO Anthony Sanfilippo scrapped the company’s plans to build a $350 million casino resort, Sugarcane Bay, beside L’Auberge at a similar site to Lee’s new project. Lee left Pinnacle, where he was also chairman, in November 2009 and Sanfilippo was hired in March 2010.
The former Pinnacle CEO has said he aims to begin building this year and to open Mojito Pointe, which includes a 400-room casino hotel with a golf course and falconry of exotic birds, in 2013. The site is adjacent to L’Auberge, which includes 1,000 rooms and a golf course. The Lake Charles casinos would compete for gamblers including those from nearby Houston, a key market that’s between two and three hours drive away.
“It’s a good place to operate a casino,” said Lee. “If you do it right, if you build a full-on resort, you attract a wealthier clientele.”
Louisiana has a lower gambling tax rate and fewer restrictions on casino operations than many other U.S. regions, making it an attractive market, Lee said. He said he’s not worried about Texas legalizing slots or casinos, because earlier efforts in the state haven’t made progress.
L’Auberge’s performance is strengthening. The property’s revenue rose 15 percent in the second quarter to $96.1 million, delivering cash flow -- measured as adjusted earnings before interest, tax, depreciation and amortization -- of $30.6 million, according to Pinnacle’s Aug. 3 earnings release.
Creative Casinos plans to eventually invest in other casino projects, Lee said.
His bid beat two rival proposals also considered by the Louisiana Gaming Control Board. Penn National Gaming Inc. (PENN), the owner of 26 casinos and racetracks, had proposed a suburban New Orleans riverboat which would have been located about three miles from Pinnacle’s Boomtown casino. Louisiana businessman William Trotter’s St. Gabriel Downs LLC had proposed a Hard Rock Hotel & Casino in Lake Charles.
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