Bally's takeover bid 'jeopardizes' Chicago casino project, investors argue

Chicago’s casino bet on Bally’s could go bust if the company goes private, according to a pair of high-profile investors trying to block a takeover effort by the debt-laden corporation’s chairman, Soo Kim.

As Bally’s scrambles to secure $800 million to build its permanent casino in River West, Kim’s bid “jeopardizes the completion of the Chicago project, putting at further risk gainful employment and tax generation in Illinois,” investors from K&F Growth Capital wrote in a letter to Bally’s board of directors Tuesday.

Shareholders — and Chicago taxpayers — would be better served if Bally’s “immediately” partnered with a more experienced, high-end gambling company to execute the remainder of the $1.7 billion project, according to K&F managing partners Dan Fetters and Edward King.

A buyout from Kim’s hedge fund, Standard General, “would only reduce the company’s capacity to finance and pursue the project, to the detriment of the Chicago community and the state of Illinois,” Fetters and King wrote, calling the bid “woefully undervalued.”

Chicago’s long-sought casino is among several “[m]oon shot bets on huge, unfunded development projects” Bally’s is juggling nationwide, they wrote. The company is also redeveloping the Tropicana on the Las Vegas Strip, and vying for a new casino in New York.

Kim announced his takeover bid last month at $15 per share — less than half the $38-per-share buyout he offered in 2022 shortly before former Mayor Lori Lightfoot picked Bally’s for the coveted Chicago casino license.

Standard General owns 26% of the company, which closed out 2023 with $163.2 million in cash and $3.6 billion in debt.

Kim has said a buyout would allow shareholders “to immediately realize a premium price, in cash, for their investment and provides stockholders certainty of value for their shares, especially when viewed against the operational risks inherent in the Company’s business and the market risks inherent in remaining a publicly-listed company.”

The company was trading at $13.62 Tuesday afternoon.

Standard General didn’t return messages seeking comment on the letter from K&F.

Fetters and King own less than 1% of Bally’s through their fund, but they’re major venture capitalists in the gaming industry, CNBC reported.

Bally’s representatives did not have any immediate comment. The company has formed a committee to evaluate Kim’s offer and previously said it is exploring “potential strategic alternatives to the proposal.”

Wall Street ratings firms Moody’s and Fitch have downgraded Bally’s credit since March, with S&P Global highlighting “development and execution risks” for the company as it aims to break ground on its permanent casino at 777 W. Chicago Ave. this summer.

Marcus Glover, Bally’s chief financial officer, has said the company needs to close a “funding gap” of about $800 million on the project before then, though executives “feel pretty good” about their odds.

The company has committed to spending $1.7 billion on the project and is contractually obligated to spend at least $1.34 billion under the host city agreement signed by Lightfoot’s administration. After expenses so far, they’ve got about $1.1 billion to go in order to hit the requirement, Bally’s has said.

But the company still hasn’t even figured out where it’s putting a massive hotel tower on the River West site, after discovering earlier this year that the location in their original plan would damage city water pipes.

Meanwhile, early returns from their temporary casino inside the historic Medinah Temple have been underwhelming since opening in September 2023. While it’s quickly proven to be one of Illinois’ biggest casino draws, it’s only generated about $4.3 million for Chicago police and firefighter pension funds — far short of projections by both Lightfoot and Mayor Brandon Johnson.

Advisers to Johnson have “indicated to us that Bally’s is going through the normal financing process. Therefore, we have no concerns at this time,” the mayor’s office said.