Bally’s Takeover Bid and the Future of the Chicago Casino Project

The Chicago casino project, faces a potential setback as Bally’s Corporation, the debt-laden company behind the development, undergoes a takeover bid by its chairman, Soo Kim. The bid has raised concerns among influential investors who argue that the bid jeopardizes the completion of the project and could have negative implications for employment and tax generation in Illinois.

K&F Growth Capital, a pair of influential investors, have expressed their reservations about Bally’s takeover bid. They believe that partnering with a more experienced, high-end gambling company would be in the best interest of shareholders and Chicago taxpayers. According to K&F managing partners Dan Fetters and Edward King, the bid from Soo Kim’s hedge fund, Standard General, is undervalued and would only hinder the company’s capacity to finance and pursue the Chicago project.

These concerns are not unfounded, as Bally’s is currently juggling several unfunded development projects nationwide. In addition to the Chicago casino, the company is also involved in the redevelopment of the Tropicana on the Las Vegas Strip and is vying for a new casino in New York. This ambitious portfolio raises questions about Bally’s ability to successfully execute these projects while managing its financial obligations.

Bally’s Corporation closed out 2023 with $163.2 million in cash and a significant debt of $3.6 billion. This financial situation has led Wall Street ratings firms Moody’s and Fitch to downgrade Bally’s credit, with S&P Global highlighting the development and execution risks associated with the company’s projects. While Bally’s Chief Financial Officer, Marcus Glover, has expressed confidence in closing the funding gap of approximately $800 million for the Chicago project, the company still faces challenges in securing the necessary funds.

Soo Kim, the chairman of Bally’s Corporation, announced his bid to take the company private at $15 per share. This offer is significantly lower than the $38-per-share buyout he proposed in 2022, just before former Mayor Lori Lightfoot selected Bally’s for the coveted Chicago casino license. Standard General, Kim’s hedge fund, currently owns 26% of the company.

Kim argues that the buyout would allow shareholders to immediately realize a premium price for their investment and provide certainty of value for their shares. He also emphasizes the operational and market risks inherent in remaining a publicly-listed company. However, K&F Growth Capital, along with other investors, believe that the bid undervalues the company and would impede its ability to finance and pursue the Chicago project.

The completion of the Chicago casino project hinges on Bally’s ability to secure the necessary funds and execute the remaining phases of the $1.7 billion project. The company is contractually obligated to spend at least $1.34 billion under the host city agreement signed by the previous administration. However, Bally’s is still grappling with challenges, such as finding an appropriate location for a massive hotel tower after discovering potential damage to city water pipes at their original site.

Furthermore, the temporary casino established at the historic Medinah Temple has not met revenue projections. Though it has been one of Illinois’ biggest casino draws, generating approximately $4.3 million for Chicago police and firefighter pension funds, it falls significantly short of expectations. The lackluster performance of the temporary casino raises concerns about the company’s ability to deliver on its promises for the permanent casino.

Despite the concerns raised by investors, Mayor Brandon Johnson’s office has indicated that Bally’s is going through the normal financing process. While the mayor’s office has no immediate concerns, it remains to be seen how the city will navigate the potential impact of the takeover bid on the Chicago casino project.