The Albatross

St. Louis has a long and tortured history with the Admiral, home of the President Casino, but the city is about to gamble another $3 million to keep it afloat. It's a risky bet.

The total cost of the move, says Zweifel, the company's CFO, will be close to $7 million. But in order to finance its part of the project, President Casinos had to come up with $4 million in cash, and right now President Casinos doesn't have a lot of cash. The company's stock has declined steadily during the past year, hitting a 52-week low on April 5 of 18.34 cents. At the end of last year, the company reported net losses of $6.6 million, even as its total liabilities shot up from $27 million at the beginning of 1999 to $91 million by year's end. Stocks are now trading around 65 cents.

Then in March, two months after the city agreed to loan the company $3 million, President Casinos announced that it would be unable to make interest payments on more than $100 million worth of outstanding debt to bondholders.

"Every year for years, we've been paying $13 million (in interest) to the bondholders," Zweifel explains. "This year, basically what we've done is tell the bondholders we had to do something in St. Louis, and instead of paying the bondholders their money, we're basically using it for capital improvements in the St. Louis Admiral operation."

To pay back its debt, the company is trying to sell its most profitable casino, the President in Davenport, Iowa. Zweifel also says the company is looking at refinancing. "The company believes that the value of its properties and assets substantially exceeds the amount of its debts, and the bondholders know that," Zweifel says. "The last thing a bondholder would want to do is close down the Admiral, because then all you have is an old boat and some slot machines. As an ongoing business, it's worth $40 million or $50 million a year. It's not a good situation, but it's something we had to do to maintain our market share in St. Louis."

As for Schoemehl, he looks back on the whole affair with regret on several levels.

"If they would have handed out five licenses downtown right away, there is no way the Gaming Commission would have handed out licenses in St. Charles and Maryland Heights," Schoemehl says. "As a result, we fractured the industry, and people who would have otherwise come downtown for gaming and entertainment have no need now.

"I can tell you this: What we don't need in downtown St. Louis right now is another high-profile failure."

It's hot on top of the Admiral. Midmorning sun shoots off the sixth deck's steel skin in bright lasers of heat as wind off the river whips around the enclosed pilothouse. When Schafersman needs a break from his nine-hour workday, this is where he likes to come.

"When we move, there will be a tow boat on the stern and one on the head," he says, looking north to an open berth where the Admiral will sit when the river drops to less than 10 feet so the boat can fit under the Eads and Martin Luther King bridges "The physical move shouldn't take more than half-a-day, but then we have to hook all of the systems up, and that will take three to five days. That's the hardest part of it all."

The city's ordinance approved in January says that if the casino fails once it has moved, the city has one year to pay off the $3 million loan for the boat's relocation before the bank can foreclose and take over the Admiral's riverfront lease. Harmon spokesperson, Chuck Miller, says the city has no need to worry about the parent company's downturn. "We've been assured and have a letter from the Admiral that the financial problems of the parent company will not affect the operation of the Admiral in any way."

Zweifel says the subsidiary that operates the Admiral is 100 percent current on its bills and that last year the boat generated a positive cash flow of about $6 million. And from his point of view, the Admiral is less in danger of closing because of the parent company's problems than it would be if the Missouri Gaming Commission approves the opening of a casino in South County.

"It could be devastating," Zweifel says.

The commission is studying three main proposals: Ameristar Casinos in Lemay, Isle of Capri Casinos near the Jefferson Barracks Bridge and Lady Luck Gaming Corp. in Kimmswick.

"We estimate that we get approximately 44 percent of our business from South City and South County," Zweifel says. "So if you build a $150 million facility down there, it's going to take away a major portion of our business. There is not a major untapped market down there. It's not like there are 550,000 people who don't have access to a casino."

From the city's point of view, the most damaging location would be in Lemay, a mere 10-minute drive south of downtown St. Louis. "I think the casino in Lemay would have an adverse effect on the Admiral, without question," says Aldermanic President Francis Slay. "It would provide competition that, based on the financial issues of the company, I'm not sure the Admiral would handle very well."

The Lemay casino is being proposed by developers whose shareholders include a shopping list of Democratic heavyweights and corporate bigwigs: former Anheuser Busch president Dennis P. Long; Glen Slay, third cousin to Aldermanic President Francis Slay; Paul Novelly of Apex Oil; Pasta House owners John Ferrara, J. Kim Tucci and Joe Fresta; Frank Bommarito; Charles Gitto; and Teddy Busch.

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