Experts say Wynn’s financial problems shouldn’t derail Everett project

Dermot Tatlow for The Boston Globe

Casino mogul Steve Wynn can’t seem to escape the bad headlines these days. Plunging revenue in Macau as the Chinese government cracks down on corruption. A proxy fight in his hometown as his former wife wages war to keep her seat on the company’s board. A nearly 40 percent decline in his company’s stock price since July.

Despite all the tumult, experts who follow Wynn Resorts say its troubles in Macau and Las Vegas pose little threat to its ambitious $1.7 billion casino project planned for Everett.

The company Steve Wynn leads remains well-capitalized: Analysts say the pile of cash at its disposal should insulate the Everett project. And the company already has the loan agreement in place that it needs to finance the bulk of that venture.

But Wynn’s efforts to expand into a third market — Massachusetts — have not gone smoothly, either. The cities of Revere, Boston, and Somerville have all filed lawsuits to overturn the Massachusetts Gaming Commission’s decision to award Wynn the Greater Boston casino license. And last week, state officials ruled that the MBTA improperly sold land to Wynn.

As a result, Wynn pushed back the casino’s estimated completion date to 2018.

“I’m sure he’s thinking to himself, is this still really worthwhile?” the Rev. Richard McGowan, an economics professor at Boston College who follows the casino industry, said of Steve Wynn. “It probably is, from his point of view. He’s looking at Boston: This could be one heck of a big market [to recoup] lost revenue from Macau.”

Wynn’s people, for their part, say the Macau problems and stock price declines have no effect on their plans for Everett. Company spokesman Michael Weaver pointed to the $1.25 billion loan agreement that Wynn reached with a group of banks in November. The majority of the Everett resort’s financing, Weaver said, is now in place.

The depth of Steve Wynn’s Macau troubles came into stark relief last month, when reports emerged that overall gambling revenue in the former Portuguese colony fell 49 percent in February from the year before. The driving force: a corruption crackdown championed by Xi Jinping, China’s president. Amid tighter visa restrictions, currency controls, high-profile arrests, and pressure on US casino operators to be vigilant about money laundering, the high rollers who Wynn counts on are largely staying home.

Harry Curtis, a managing director at the Japanese investment bank Nomura, said he expects Macau’s casino market to contract by 25 percent in 2015. This is particularly troublesome for Wynn, which gets nearly two-thirds of its revenue from its Macau operations. Total Macau revenue fell 32 percent for Wynn in the final three months of 2014, and the company’s total quarterly profits were cut in half, dropping to $109 million. (The company has not reported its first-quarter results for 2015 yet.)

Macau is one of Asia’s most prosperous cities and a place where casino spending dwarfs the bets on the Las Vegas Strip. But the turmoil there is upending its economy’s cash cow at a time when several more gambling palaces are expected to open within the next year or so. Wynn, for example, has a $4 billion casino project slated to be done in 2016.

“The returns on those businesses are going to be coming down from what were stratospheric returns to still very attractive returns,” Curtis said. “The $65,000 question is, will the market [be] enough to generate an attractive return on the next round of casinos that are opening?”

As Steve Wynn watched the value of his company shrink amid the Macau slowdown, his board also faced a public showdown with his former wife, Elaine Wynn. The two own large stakes in Wynn Resorts, and Elaine Wynn still works with her onetime husband on the board of directors. But that business relationship could be ending soon: The company in February proposed eliminating Elaine Wynn’s seat, primarily because of her 2012 lawsuit against her former husband, an effort to void a shareholder agreement that limits access to most of her Wynn stock.

Elaine Wynn is playing up the board’s lack of diversity. Without her, she points out, there will be no women on the board. Shareholders will vote April 24.

The battle got uglier last weekend, when Institutional Shareholder Services Inc. waded into the fray. The shareholder advisory firm slammed Steve Wynn, saying he’s vastly overpaid, compared with his peers at other casino operators, and calling out his $1 million-plus in personal use of the company’s aircraft last year. The firm refused to back Elaine Wynn, however, saying she has been no more of a protector of shareholders’ interests than any of the other directors.

Wynn’s problems don’t seem to be rattling the Massachusetts Gaming Commission. But Revere Mayor Dan Rizzo, a Wynn critic, said they are emblematic of why the state should put the brakes on the Everett project. Rizzo has been on the warpath since September, when the commission picked Wynn’s project over a competing casino proposal for Suffolk Downs that he favored.

“Essentially, what’s happening here, over the last six months or so, is a bad decision by the Gaming Commission has just been made into a worse decision, based on everything that’s happening in Macau,” Rizzo said.