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For according to the company's June 30, 2006, balance sheet, PartyGaming owes its clients $192.6 million in liabilities and prize pools, while having only $132.9 million in cash and cash equivalents to meet that obligation. And those cash holdings are likely to have fallen sharply, because of $130.5 million of cash spent on an acquisition in August.
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This really is kind of puzzling to me. Does anybody here have access to PartyGaming's Financial statements? If Party really has Player money in a segregated account then it should show up on the balance sheet and Barron's statement should prove to be bogus. But then what's up with Barron's? Are they unable to read a balance sheet? Are they deliberately not mentioning the Special segregated account? ie. Are they either incompetent or liars?
There is really no reason why we can't read the Party Financials for ourselves. Surely somebody around here is a Party Stockholder and has a copy.
PairTheBoard
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Read em for yourself:
Party Gaming's 6/30/06 Interim F/S
Barron's analysis seems to be correct, as I assumed it would be.
What made you believe that they had player money in a segregated account, I don't see that.
FWIW, I am a CPA.
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I don't recall what Party specifically has said about it, but we've heard from numerous sites that Player Money is kept in a seperate account - on deposit in banks for example.
They show $155 million in "Trade and other Recievables". What could Party possibly have in the way of Recievables to the tune of $155 million? Is it possible that this is the account line containing Player Monies?
Also, in the $192 million for "Client Liabilities and Prize Pools" could they be including all the "Guaranteed" type tournaments? For example, the Sunday Million Guaranteed may show as a $1 million current liability even though the $1 million always ends up being covered by player entry fees.
As a CPA, what's your take on this Tom? They will surely have around 75% of Player Accounts withdrawn after Saturday. If the Barron's analysis is correct they certainly don't appear to have the cash to cover those withdrawls. Should we be buying Puts on Party next week? Are you going to buy Puts on Party next week?
PairTheBoard
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I would like to see a response from him, or another CPA/analyst on this stuff.
Here's my take...
Net Cash (cash/equivalents-debt) = $132.9m-$40m =$92.8m
-they had drawn $40m on the previously existing credit facility.
Client Liabilities & prize pools- I would like to get some clarification on this but I believe it would be client deposits and payouts not yet on the balance sheet.
= $192.6m
receivables- payables (incl tax payable) = $0
This would leave them $100m short while they renegotiate the $500m revolving credit facility. In other words, it comes down to the lenders- how hard will it be for them to get a loan in this situation. All of this does not include the recent acquisition, which might put them close to another $100m short.
= roughly $200m short on cash.
But here's the thing, virtually all of their op. cashflow will dry up immediately, while it looks like they have roughly $500k/day in operating expenses, this number would probably get cut in half fairly quickly.
That's my take after looking at press releae, I'm no analyst but I've spent some time going through these over the years. Hopefully someone who is an expert in this area can go through this and confirm/ fix my mistakes.
Bottom line- It's up to the lenders.