Today it was announced by Linn Energy (NASDAQ:LINE) and LinnCO (NASDAQ:LNCO) that the MLP intends to do a public offering of $1.0 billion of senior notes to raise cash. This $1 billion underwriting will consist of two rounds of 6.5% senior unsecured notes. One set will be due in 2019 and another round of the senior unsecured notes will be due in 2021. There is a special consideration for those due in 2019. The 6.5% senior notes due 2019 are expected to be issued as additional notes after the company issued $750 million of 6.5% senior notes due 2019 back on May 13, 2011. These additional 6.5% senior notes that are due in 2019 will be treated as a single class of debt securities with the previously issue senior notes due 2019. Net proceeds from the offering as well as cash on hand are expected to be used to repay indebtedness outstanding under Linn Energy's bridge loan agreement. Barclays Capital Inc., Scotia Capital [USA] Inc., RBC Capital Markets, LLC, Wells Fargo Securities, LLC, Citigroup Global Markets Inc., Credit Agricole Corporate and Investment Bank, Goldman, Sachs & Co., RBS Securities Inc. and UBS Securities LLC are acting as joint book-running managers for the offering.
When I last opined on the company, Linn was busy trying....READ FULL ARTICLE
Thursday, September 4, 2014
Wednesday, September 3, 2014
Revel Closing Shows atlantic city weakness
The Revel Casino Hotel was envisioned as a playground for Wall Streeters who hated flying to Las Vegas. Instead, it's become a money pit for the banks and money managers who spearheaded the New Jersey project, and the losses will keep coming even after closing today.
The Atlantic City resort, built at a cost of $2.4 billion, ceased operations after two bankruptcies and a 10-month search for a buyer. Barring a sale, the new owners may be Wells Fargo & Co. and JPMorgan Chase & Co., which provided $125 million in court-approved funding. Previous backers also included Capital Group Cos., the third-largest manager of U.S. mutual funds, and Morgan Stanley, the original investor.
The resort fell prey to poor timing, bad design and a misreading of the local market. The Revel saga shows what can go wrong when bankers stray from what they know, according to Charles Geisst, a professor of finance at Manhattan College in New York and author of the book "Wall Street: A History."
"The check-in desk at Revel was on the 11th floor, reached by escalator," Geisst said in an e-mail. "That's not planned or invested in by someone who understands the hotel business."
It's also a case study that has implications for Governor Chris Christie and other local leaders as they ponder what's next for Atlantic City in a summit scheduled for Sept. 8. A future beyond gambling might be the answer.
Name Recognition
Donald Trump, whose brand once topped three Atlantic City casinos, sued last month to get his name removed from the remaining two properties.
"I see what's happening in Atlantic City; it's just too much competition," Trump said in an interview with Bloomberg Television's Trish Regan. "There's too much pressure from Pennsylvania, Maryland, and ultimately everybody's going to do badly because they're looking at casinos as a panacea."
Revel's early champion was Michael Garrity, a principal in Morgan Stanley's private-equity arm in the mid-2000s, and before that an analyst at Putnam Investments and an investment banker at Rothschild Group.
Morgan Stanley backed Revel to bring a more upscale casino to the northeastern U.S., Garrity told New Jersey regulators at a 2012 licensing hearing, before its April opening.
"I've spent a lot of years on Wall Street," Garrity said. "What's always amazed me, the thousands of traders, analysts, private-equity guys, bankers that will jump on a plane, fly four to five hours to Vegas, lose the day on the way back. Because they're gamblers? No. Because they want to have fun. And that was really the premise behind Revel."
Garrity couldn't be reached for comment. Wells Fargo, Capital Group, JPMorgan and Morgan Stanley declined to comment.
Initial Stumble
Revel stumbled before it opened. Morgan Stanley had $800 million in the project when the 2008 financial crisis hit. Kevin DeSanctis, a casino veteran and the resort's first chief executive, met with bank officials and told them they would be in a better position to complete the project down the road if they invested $480 million to finish the structural work, according to his testimony at the same 2012 hearing.
New York-based Morgan Stanley ultimately put in more than $1.2 billion, before writing off Revel and selling its interest for $35.5 million to an investor group led by DeSanctis in 2011.
DeSanctis raised $1.15 billion from a new set of lenders led by JPMorgan to finish the development. To bolster the financing, New Jersey agreed to provide $261 million in tax credits as part of Christie's push to reverse Atlantic City's declining fortunes.
Fresh Capital
With new funds, construction of the 47-story property resumed. DeSanctis held off finishing 500 of the planned 1,900 hotel rooms, expecting to complete a more-exclusive boutique section with a separate elevator at a later date.
"We've already talked to several folks who are very interested in doing that," DeSanctis, formerly with Penn National Gaming Inc. and Mirage Hotel Resort & Casino, told regulators at the 2012 hearing.
DeSanctis, reached by e-mail, declined to comment.
More challenges loomed. Cost overruns topped $100 million, forcing Revel to seek additional funds shortly after opening, according to a June declaration in bankruptcy court by Shaun Martin, the company's chief restructuring officer.
Revel had to supply its own electricity, and entered into a costly 20-year agreement requiring it to pay power plant operating expenses and a 15 percent guaranteed return to a third party, ACR Energy Partners.
Gastro Pub
The resort, which opened in April 2012, features 2,300 slot machines, two nightclubs, two theaters and 13 restaurants, including Amada, an Andalusian tapas bar, and the Mussel Bar & Grille, a "gastro-pub with Belgian flair," according to marketing materials. The property includes five pools and a "SkyGarden" with 20,000 trees and plants.
In targeting high-end, overnight guests, Revel skipped the amenities that Atlantic City's traditional customers look for, Martin said. The resort didn't have a lounge for frequent gamblers or affordable food and beverage options.
Hurricane Sandy closed Atlantic City for six days in late 2012. Short of cash and running at a loss before any interest costs, Revel tapped investors for $150 million that December, according to a statement, and in March 2013 filed its first bankruptcy petition.
Debt Erased
In that restructuring, Revel wiped out 82 percent of its $1.5 billion in debt. Funds affiliated with Chatham Asset Management LLC, Canyon Capital LLC and Capital Group ended up with the equity. DeSanctis stepped down and interim CEO Jeff Hartmann, former president of the Mohegan Sun casino, took over.
Canyon Capital declined to comment. A spokesman for Chatham said it exited the investment in May.
In June, Revel filed for bankruptcy a second time. If a buyer can't be found, some creditors may be wiped out, while others are left with the cost of maintaining a dormant building.
Revel made efforts to broaden its appeal, ending its smoke-free policy, opening two lounges for VIPs and introducing Relish, a 24-hour cafe with fried shrimp and French fries for $5.99.
"It's a beautiful resort, you have to have a seven-day-a-week plan," Hartmann said in a telephone interview last month. "People are looking for quality food at a reasonable price point."
‘Gamblers Wanted'
Hartmann added the word "casino" to the property name and introduced a marketing slogan: "Gamblers wanted." He started a controversial promotion promising to refund slot machine losses greater than $100 for the month of July. A lawsuit claims Revel didn't make it clear the refunds would be paid out over 20 weeks in casino credit.
In October, Revel's board named Scott Kreeger, a former executive with Station Casinos, as chief operating officer. Hartmann left. Kreeger wasn't available for comment, said Lisa Johnson, a spokeswoman.
Design flaws remain a challenge, according to Robert Heller, chief executive officer of Spectrum Gaming Capital LLC, an investment bank in New York. They include a "bland" front entrance, little pedestrian activity at Revel's northern end of the city's boardwalk and long escalators that older patrons find "intimidating."
"People want to move quickly through spaces," Heller said in a telephone interview. "Vertical in casinos is never a good thing."
Patrons could access the lobby and casino by elevator said Johnson.
City's Decline
Revel's failure shows how "the best and the brightest, the smartest guys in the room" misjudged the market and the pace of Atlantic City's decline, according to Izzy Posner, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Richard Stockton College of New Jersey.
Casino revenue in the city, which introduced gambling as an economic development tool in 1978, is down more than 40 percent to $2.86 billion from the 2006 peak as neighboring states entered the business. Four of the city's 12 casinos have closed or are slated to close by mid-September. Caesars Entertainment Corp.'s Showboat shut down Aug. 31.
Atlantic City's casino revenue is expected to decline to around $2 billion annually, Alex Bumazhny, a Fitch Ratings analyst, said in an Aug. 29 report. About half of Revel's business will transfer to other casinos in the city, with those located away from the boardwalk -- Boyd Gaming Corp.'s Borgata, Landry Inc.'s Golden Nugget and Caesars Entertainment Co.'s Harrah's -- seeing most of the benefit.
Local officials, including Mayor Don Guardian and state Senator Jim Whelan, say someone will pick up Revel for pennies on the dollar.
"Hopefully it'll be a real casino company," Whelan said.
The Atlantic City resort, built at a cost of $2.4 billion, ceased operations after two bankruptcies and a 10-month search for a buyer. Barring a sale, the new owners may be Wells Fargo & Co. and JPMorgan Chase & Co., which provided $125 million in court-approved funding. Previous backers also included Capital Group Cos., the third-largest manager of U.S. mutual funds, and Morgan Stanley, the original investor.
The resort fell prey to poor timing, bad design and a misreading of the local market. The Revel saga shows what can go wrong when bankers stray from what they know, according to Charles Geisst, a professor of finance at Manhattan College in New York and author of the book "Wall Street: A History."
"The check-in desk at Revel was on the 11th floor, reached by escalator," Geisst said in an e-mail. "That's not planned or invested in by someone who understands the hotel business."
It's also a case study that has implications for Governor Chris Christie and other local leaders as they ponder what's next for Atlantic City in a summit scheduled for Sept. 8. A future beyond gambling might be the answer.
Name Recognition
Donald Trump, whose brand once topped three Atlantic City casinos, sued last month to get his name removed from the remaining two properties.
"I see what's happening in Atlantic City; it's just too much competition," Trump said in an interview with Bloomberg Television's Trish Regan. "There's too much pressure from Pennsylvania, Maryland, and ultimately everybody's going to do badly because they're looking at casinos as a panacea."
Revel's early champion was Michael Garrity, a principal in Morgan Stanley's private-equity arm in the mid-2000s, and before that an analyst at Putnam Investments and an investment banker at Rothschild Group.
Morgan Stanley backed Revel to bring a more upscale casino to the northeastern U.S., Garrity told New Jersey regulators at a 2012 licensing hearing, before its April opening.
"I've spent a lot of years on Wall Street," Garrity said. "What's always amazed me, the thousands of traders, analysts, private-equity guys, bankers that will jump on a plane, fly four to five hours to Vegas, lose the day on the way back. Because they're gamblers? No. Because they want to have fun. And that was really the premise behind Revel."
Garrity couldn't be reached for comment. Wells Fargo, Capital Group, JPMorgan and Morgan Stanley declined to comment.
Initial Stumble
Revel stumbled before it opened. Morgan Stanley had $800 million in the project when the 2008 financial crisis hit. Kevin DeSanctis, a casino veteran and the resort's first chief executive, met with bank officials and told them they would be in a better position to complete the project down the road if they invested $480 million to finish the structural work, according to his testimony at the same 2012 hearing.
New York-based Morgan Stanley ultimately put in more than $1.2 billion, before writing off Revel and selling its interest for $35.5 million to an investor group led by DeSanctis in 2011.
DeSanctis raised $1.15 billion from a new set of lenders led by JPMorgan to finish the development. To bolster the financing, New Jersey agreed to provide $261 million in tax credits as part of Christie's push to reverse Atlantic City's declining fortunes.
Fresh Capital
With new funds, construction of the 47-story property resumed. DeSanctis held off finishing 500 of the planned 1,900 hotel rooms, expecting to complete a more-exclusive boutique section with a separate elevator at a later date.
"We've already talked to several folks who are very interested in doing that," DeSanctis, formerly with Penn National Gaming Inc. and Mirage Hotel Resort & Casino, told regulators at the 2012 hearing.
DeSanctis, reached by e-mail, declined to comment.
More challenges loomed. Cost overruns topped $100 million, forcing Revel to seek additional funds shortly after opening, according to a June declaration in bankruptcy court by Shaun Martin, the company's chief restructuring officer.
Revel had to supply its own electricity, and entered into a costly 20-year agreement requiring it to pay power plant operating expenses and a 15 percent guaranteed return to a third party, ACR Energy Partners.
Gastro Pub
The resort, which opened in April 2012, features 2,300 slot machines, two nightclubs, two theaters and 13 restaurants, including Amada, an Andalusian tapas bar, and the Mussel Bar & Grille, a "gastro-pub with Belgian flair," according to marketing materials. The property includes five pools and a "SkyGarden" with 20,000 trees and plants.
In targeting high-end, overnight guests, Revel skipped the amenities that Atlantic City's traditional customers look for, Martin said. The resort didn't have a lounge for frequent gamblers or affordable food and beverage options.
Hurricane Sandy closed Atlantic City for six days in late 2012. Short of cash and running at a loss before any interest costs, Revel tapped investors for $150 million that December, according to a statement, and in March 2013 filed its first bankruptcy petition.
Debt Erased
In that restructuring, Revel wiped out 82 percent of its $1.5 billion in debt. Funds affiliated with Chatham Asset Management LLC, Canyon Capital LLC and Capital Group ended up with the equity. DeSanctis stepped down and interim CEO Jeff Hartmann, former president of the Mohegan Sun casino, took over.
Canyon Capital declined to comment. A spokesman for Chatham said it exited the investment in May.
In June, Revel filed for bankruptcy a second time. If a buyer can't be found, some creditors may be wiped out, while others are left with the cost of maintaining a dormant building.
Revel made efforts to broaden its appeal, ending its smoke-free policy, opening two lounges for VIPs and introducing Relish, a 24-hour cafe with fried shrimp and French fries for $5.99.
"It's a beautiful resort, you have to have a seven-day-a-week plan," Hartmann said in a telephone interview last month. "People are looking for quality food at a reasonable price point."
‘Gamblers Wanted'
Hartmann added the word "casino" to the property name and introduced a marketing slogan: "Gamblers wanted." He started a controversial promotion promising to refund slot machine losses greater than $100 for the month of July. A lawsuit claims Revel didn't make it clear the refunds would be paid out over 20 weeks in casino credit.
In October, Revel's board named Scott Kreeger, a former executive with Station Casinos, as chief operating officer. Hartmann left. Kreeger wasn't available for comment, said Lisa Johnson, a spokeswoman.
Design flaws remain a challenge, according to Robert Heller, chief executive officer of Spectrum Gaming Capital LLC, an investment bank in New York. They include a "bland" front entrance, little pedestrian activity at Revel's northern end of the city's boardwalk and long escalators that older patrons find "intimidating."
"People want to move quickly through spaces," Heller said in a telephone interview. "Vertical in casinos is never a good thing."
Patrons could access the lobby and casino by elevator said Johnson.
City's Decline
Revel's failure shows how "the best and the brightest, the smartest guys in the room" misjudged the market and the pace of Atlantic City's decline, according to Izzy Posner, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Richard Stockton College of New Jersey.
Casino revenue in the city, which introduced gambling as an economic development tool in 1978, is down more than 40 percent to $2.86 billion from the 2006 peak as neighboring states entered the business. Four of the city's 12 casinos have closed or are slated to close by mid-September. Caesars Entertainment Corp.'s Showboat shut down Aug. 31.
Atlantic City's casino revenue is expected to decline to around $2 billion annually, Alex Bumazhny, a Fitch Ratings analyst, said in an Aug. 29 report. About half of Revel's business will transfer to other casinos in the city, with those located away from the boardwalk -- Boyd Gaming Corp.'s Borgata, Landry Inc.'s Golden Nugget and Caesars Entertainment Co.'s Harrah's -- seeing most of the benefit.
Local officials, including Mayor Don Guardian and state Senator Jim Whelan, say someone will pick up Revel for pennies on the dollar.
"Hopefully it'll be a real casino company," Whelan said.
Tuesday, September 2, 2014
Dont give up on exelixis yet
Exelixis, Inc. (NASDAQ:EXEL) just announced top-line results from the final analysis of its COMET-1 Phase 3 pivotal trial of cabozantinib (Cometriq) in men with metastatic castration-resistant prostate cancer (mCRPC) whose disease progressed after treatment with docetaxel as well as abiraterone and/or enzalutamide. Unfortunately, the trial did not meet its primary endpoint of demonstrating a statistically significant increase in overall survival compared to control patients treated with standard prednisone therapy. While the results were in a favorable direction, they weren't strong enough to meet the statistical cutpoints required for success. The main statistic, which has sent the stock plummeting 54% at the time of this writing is that the median overall survival for the cabozantinib arm of the trial was 11.0 months versus 9.8 months for the prednisone arm. This resulted in a hazard ratio of 0.90 (95% CI 0.76, 1.06). The secondary endpoint of progression-free survival (which has never been used as a basis for approving a prostate cancer drug) was 5.5 months for the cabozantinib arm of the trial versus 2.8 months for the prednisone arm. These results were significant, generating a hazard ratio of 0.50 (95% CI 0.42, 0.60).
In an article I published a few weeks ago, I had argued that......READ FULL ARTICLE
In an article I published a few weeks ago, I had argued that......READ FULL ARTICLE
More on the family dollar potential sale
Family Dollar Stores, Inc. (NYSE: FDO), a leading national discount retailer offering name brands and quality, private brand merchandise, today confirmed that it has received a revised, non-binding, unsolicited proposal from Dollar General (DG) to acquire all of the outstanding common shares of Family Dollar (FDO).
Consistent with its fiduciary duties and subject to the terms of its existing merger agreement with Dollar Tree, Inc. (DLTR), Family Dollars Board of Directors, in consultation with its legal and financial advisors, will review and consider the revised proposal.
The Company's Board of Directors has not changed its recommendation in support of the merger with Dollar Tree. Family Dollar will have no further comment on Dollar Generals proposal until the Board has completed its review.
As announced on July 28, 2014, Family Dollar entered into a definitive merger agreement with Dollar Tree, Inc., the nation's leading operator of discount variety stores selling everything for $1 or less, under which Dollar Tree would acquire Family Dollar in a cash and stock transaction. Under the terms of the agreement, Family Dollar shareholders would receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares for each common share of Family Dollar owned, subject to a collar. At closing, Family Dollar shareholders would own no less than 12.7% and no more than 15.1% of the outstanding common stock of Dollar Tree.
Morgan Stanley & Co. LLC is serving as exclusive financial advisor to Family Dollar and Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel.
Consistent with its fiduciary duties and subject to the terms of its existing merger agreement with Dollar Tree, Inc. (DLTR), Family Dollars Board of Directors, in consultation with its legal and financial advisors, will review and consider the revised proposal.
The Company's Board of Directors has not changed its recommendation in support of the merger with Dollar Tree. Family Dollar will have no further comment on Dollar Generals proposal until the Board has completed its review.
As announced on July 28, 2014, Family Dollar entered into a definitive merger agreement with Dollar Tree, Inc., the nation's leading operator of discount variety stores selling everything for $1 or less, under which Dollar Tree would acquire Family Dollar in a cash and stock transaction. Under the terms of the agreement, Family Dollar shareholders would receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares for each common share of Family Dollar owned, subject to a collar. At closing, Family Dollar shareholders would own no less than 12.7% and no more than 15.1% of the outstanding common stock of Dollar Tree.
Morgan Stanley & Co. LLC is serving as exclusive financial advisor to Family Dollar and Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel.
Exelixis failed its phase 3 metastatic prostate cancer trial---one analysts response
In a report issued today, Cowen analyst Eric Schmidt downgraded Exelixis (NASDQ:EXEL) to Market Perform (from Outperform), following failure of cabozantinib to extend overall survival in pivotal COMET-1 trial. Exelixis announced a substantial restructuring that should provide the company with enough of a cash runway to get to Phase III data on cabozantinib in RCC (expected in 2015). No price target was given.
Schmidt noted: “Cabozantinib’s potential opportunity in prostate cancer was the basis for our Outperform recommendation on EXEL shares. With this thesis now discredited, we are moving to the sidelines. While we think cabozantinib has a reasonable chance of success in RCC, that market is more competitive, and investors are unlikely to ascribe cabo much value in this secondary indication until data are in hand. Exelixis also holds 30-50% U.S. ownership of Roche’s cobimetinib (melanoma filing in combination with Zelboraf expected by YE). However the U.S. market for BRAF negative melanoma is small and shrinking. Meanwhile, Exelixis’s balance sheet is weak. As of June 30, the company held cash of $352MM and debt of $462MM (most of which is due in 2018 and 2019 assuming the company picks up its option to extend the Deerfield loan). Hence, near flawless execution in RCC may be needed to maintain significant value in the company’s equity.”
Schmidt noted: “Cabozantinib’s potential opportunity in prostate cancer was the basis for our Outperform recommendation on EXEL shares. With this thesis now discredited, we are moving to the sidelines. While we think cabozantinib has a reasonable chance of success in RCC, that market is more competitive, and investors are unlikely to ascribe cabo much value in this secondary indication until data are in hand. Exelixis also holds 30-50% U.S. ownership of Roche’s cobimetinib (melanoma filing in combination with Zelboraf expected by YE). However the U.S. market for BRAF negative melanoma is small and shrinking. Meanwhile, Exelixis’s balance sheet is weak. As of June 30, the company held cash of $352MM and debt of $462MM (most of which is due in 2018 and 2019 assuming the company picks up its option to extend the Deerfield loan). Hence, near flawless execution in RCC may be needed to maintain significant value in the company’s equity.”
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