They are figures that would be great at any time for New Jersey, however, at the time of a global pandemic, it is supplying an important bottom line to add to the State Budget in order to pay for the Garden State’s services and infrastructure.
However, for all the drums beating for more online casinos, meanwhile, renown economic ratings agency, Fitch has downgraded Atlantic City Casinos.
Pandemic hits Atlantic City Casinos Hard
Atlantic City’s recent recovery efforts have been fading due to the global pandemic. Since reopening doors to the general public in July, Atlantic City’s casinos have been operating at only 25% of their usual capacity. The result has been a substantial decrease in money flowing into the city. The State Government of New Jersey has been wanting to assist the city with the revenue generated from the city’s casino industry. The New Jersey Casino Reinvestment Development Authority (CRDA), originally established in 1984, has been deeply involved in this process. Over the last 36 years, the CRDA has injected millions into the Atlantic City economy by issuing investment bonds.
Unfortunately, however, with the closure of the casinos, Atlantic City’s future development projects have been threatened, and in some cases already been postponed.
Respected risk rating agency Fitch Ratings recently undertook an analysis of the city’s financial position and if any ‘bounce back’ recovery from the gambling activity has occurred. Unfortunately, though, the outlook is less than encouraging and the CRDA bonds ratings has been lowered significantly.
Atlantic City Casinos lowered a Full Rating Point
As a result of the CRDA bonds’ rating falling from BBB+ down to BBB, their $ 215 million value is now considered a riskier proposition.
On the upside, Fitch still believes that the risk of default on the bonds remains low. Looking at how Fitch describes its ratings, their BBB rating reflects that “adverse business or economic conditions are more likely to affect” the risk;
“The downgrade of CRDA’s luxury tax revenue bonds to ‘BBB’ from ‘BBB +’ reflects the severity of the declines in promised revenue in 2020, the probable slow trajectory of the recovery of casinos and other entertainment activities in Atlantic City,” Fitch reported.
“The Negative Outlook at the ‘BBB’ rating level reflects heightened uncertainty about the strength of taxable activity through the recovery period and the vulnerability of receipts to further pressures, including those posed by prolonged public health concerns. Therefore, the luxury tax revenue earlier and the greater vulnerability of the structure to income volatility in the short term, relative to our expectations of the pandemic,” the respected ratings agency added.
Numerous businesses and industries have obviously been affected by the global pandemic and associated business closures; however, Atlantic City’s casinos have been infused with new life through online betting and the legalization of sports betting.
Through September 2020, online gaming revenue was up more than 102%, with online casinos winning $685.6 million. That’s a massive $346.5 million more than the interactive platforms won during the same nine-month period in 2019.
For all the bleak outlook in Atlantic City, the pandemic has exacerbated the complete takeover of the gaming industry by the online casino and sports betting sectors. It is booming, pushing the Garden State into Number 1 position as the U.S. leading gaming state at the expense of long term and traditional leader, Nevada.
