Merrill Lowers Argosy Gaming to 'Neutral'

Analyst David Anders thinks gaming tax legislation could pass in Illinois, a key source of revenue for the casino operator

Merrill Lynch downgraded Argosy Gaming (AGY ) to neutral from buy.

Analyst David Anders says it appears as though momentum for positive legislative changes in Illinois has dwindled, while the potential for a rise in gaming taxes has increased significantly. He notes Argosy generates roughly 35% of its EBITDA in Illinois.

On Tuesday the state's Housing Gaming Committee recessed for legislative session after repeated warnings by the Governor to veto any legislation expanding gaming in Illinois. He notes the Governor's originally proposed plan would institute a 70% windfall tax on gaming revenues above $250 million.

Anders thinks this proposal could cost 57 cents a share for Argosy.

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