Odds of Party collapsing on Saturday?

[Gregg777]

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Neither event has happened "thousands of times".

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Incorrect.

A company collapsing when a large portion of it's assets, capital, whatever you want to call it is pulled, has easily happened more than 2000 times in all of history.

Therefore...

Yes, one has happened "thousands" of times, and one has not happened at all.

Will Party collapse? I doubt it, but to compare it with the probability of it snowing four feet in Antigua is a bit of a stretch.

[crubfrush]

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Unfortunately, Party will probably not go under. It would be better if they did.

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That would be an absolute disaster for poker. If even a handful of people got burned by Party in the upcoming rush to cashout, it might spell the end of the average person trusting their money with an offshore gambling company.

For all our sakes, let's hope things go smoothly and we're all happily playing on Stars or wherever next week.

[Gregg777]

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Unfortunately, Party will probably not go under. It would be better if they did.

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That would be an absolute disaster for poker. If even a handful of people got burned by Party in the upcoming rush to cashout, it might spell the end of the average person trusting their money with an offshore gambling company.

For all our sakes, let's hope things go smoothly and we're all happily playing on Stars or wherever next week.

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Very true.

[Wongboy]

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Unfortunately, Party will probably not go under. It would be better if they did.

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That would be an absolute disaster for poker. If even a handful of people got burned by Party in the upcoming rush to cashout, it might spell the end of the average person trusting their money with an offshore gambling company.

For all our sakes, let's hope things go smoothly and we're all happily playing on Stars or wherever next week.

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I agree with both positions on this. If a number of average people lose funds on Party, that would be a bad thing. If Party makes good on all deposits, and then slowly dies away and goes out of business in 6-12 months, that would be a great thing.

The latter scenario would go something like this. Party makes good on all deposits and this puts them into an immediate cash flow crises. Their Lines of credit are cancelled because they fail various liquidity covenants. As a result, Party cuts all non-essential expenses like marketing and customer service (not much room to cut there). They also discontinue bonuses, scale back guarantees and other player incentives, etc. By the time the death knell finally sounds, there are a few players that get burned, but most players (US and non-US) will have cashed out and switched sites long ago.

[DpR]

My 5 minute analysis (posted int eh barron's thread) leads me to belive party would be easily funded to handle withdrawls. I really do not see a liquidity issue there.

[gonebroke]

I am not worried about PartyGaming collapsing. I am worried about the privately held sites that will continue to deal cards to Americans. What happens if they have executives arrested or their offices raided? At least we can look at the books of PartyGaming and get an idea of their financial health. Unfortunately, we have no clue what the financial health of the privately held sites are. Judging by the actions of the Department of Justice, I do not see them backing down anytime soon. In the end, the safest place to keep your money might end up being PartyGaming.

[DpR]

This is a good point for the future of online gaming. Keeping 100k rolls online has suddenly gotten a lot riskier.

[sbj99]

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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.

[sbj99]

One more thing. If any of my above post is accurate, and they have to depend on their lenders to satisfy cashouts, here's some more doom and gloom. The banks have got them by the balls now.

From the sep. conference call...

Martin Weigold:
<<I would also add that this industry is unique in a number of ways. And in respect of the capacity for bank debt, it is limited in terms of the number of banks that would participate. And I think that the existing source that we’ve got is pretty close to that limit.I’m pleased to say that we got to the maximum that we wanted to raise and thought we were going to raise. But if you compare it to any other players in the industry, you could add every other piece of debt in the industry together, it’s not as big as our debt.>>

[Michael C.]

If Party was really going to collapse on Saturday, would they have really announced so quickly they were pulling out, announce plans for points store and other issues after the bill is signed, etc.? I don't even think Party could be that stupid.