Morgans Trouble With Resources

After Morgans Hotel Group's decisive purchase of the Hard Rock Hotel and Casino, Wall Street analysts and gaming observers are abuzz with opinions on how Morgans could move forward from the purchase considering financial constraints.

Morgan's own remarks to the media, as well as Wall Street reports, essentially indicate that Morgan's will most likely be drained before it could completely cover the cost of the Las Vegas acquisition and development lineup.

A recent research report by Citigroup indicates that Morgan's has committed $900 million to Vegas for the $770 million Hard Rock purchase and a two-hotel share of Boyd Gaming's Echelon Place megaresort.

To gather the amount, Morgans could tap its $94 million cash reserve and maximize its borrowing capacity, which is $825 million, analysts said. However, these same analysts quickly added, where would Morgan's get its operating capital as well as expansion budget for Hard Rock?

Observers also noted that since Morgans has yet to obtain a Nevada gaming license, it cannot potentially collect substantial casino revenues.

Industry players close to Morgan's have said that perhaps the reason behind Morgan's indecision over applying for a Nevada gaming license may involve the company founder and now convicted felon -- Ian Schrager.

Still, Nevada Gaming Control Board member Mark Clayton said a felony conviction is not necessarily grounds for not issuing a Nevada licensure.

Meanwhile, as analyts exhange views on the matters about the Morgan's, the gaming public awaits the next step for Morgan.

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