The Monarch Casino Resort Spa Black Hawk in Black Hawk, Colorado is undergoing a major renovation that will see it become a massive integrated resort in the city. Because of the size of the project, a handful of subcontractors are involved in the transformation and teamed up to form PCL to oversee the upgrades. There now appears to be some bad blood between the property’s owner, Monarch Casino & Resort, and things have boiled over to the point that PCL felt compelled to sue the company. As the suit was announced, Monarch watched as its NASDAQ stock dropped throughout the day yesterday.
Monarch has accused PCL previously of not managing the renovation project or costs more appropriately. It has been attempting to force PCL into action through various methods that have led PCL to seek litigation, a move Monarch believes is an attempt to “deflect attention from their failures to deliver the completed project in a timely and cost appropriate manner.”
The company explains that the lawsuit is going to cause a slowdown in work, stating in a press release, “Given this lawsuit, the increasingly adversarial tone of communication from PCL, and our understanding of recent discussions regarding project delivery, we now believe that our expansion project – the new Monarch Casino Resort Spa Black Hawk – including the expanded casino, restaurants and certain public areas – should be fully open in the first quarter of 2020. The remaining remodeling of some areas of the existing casino is expected to be completed in the second quarter of 2020.”
Investors weren’t pleased with the news and showed their displeasure by bringing the company’s stock down by 5% on Tuesday. This follows a downward trend from the past five days, after Monarch saw a recent high on August 30 of $45.20. By yesterday afternoon, the stock was sitting at $41.94 before ultimately finishing the day at $42.17.
It’s not just the fact that there’s a lawsuit and construction delays that caused the stock to fall. It’s what those two mean to behind-the-scenes activity at Monarch that has investors worried. According to a filing with the Securities and Exchange Commission (SEC) from August, Monarch has a $250-million credit facility that has to be appropriately managed, and that can’t be done without timely completion of the upgrades.
The filing explained, “The total revolving loan commitment under the Amended Credit Facility will be automatically and permanently reduced to $50.0 million on the earlier of the last business day of the first full quarter after completion of the expansion project at the Monarch Casino Black Hawk, or on December 31, 2019, and all then-outstanding revolving loans up to $200.0 million under the Amended Credit Facility will be converted to a term loan at such time.”
Since Monarch is now looking at the end of 2020 before the project will be complete, keeping up with those terms becomes more difficult. Needless to say, Monarch is “eager to resolve all of the outstanding issues.”
