Investors Warn Takeover Bid May Threaten Bally’s Chicago Casino

Bally’s Chairman Soo Kim is coming under fire for his plan to rescue his struggling casino company by taking it over. (Image: Brian Cassella/Chicago Tribune/Alamy)

Investors from K&F Growth Capital are warning that a Bally’s takeover bid by Soo Kim’s hedge fund would put the company’s Chicago casino project at risk, and want the firm to take another path out of debt.

The investors – K&F managing partners Dan Fetters and Edward King – expressed their opinions in a letter to Bally’s board of directors on Tuesday.

Kim Offering Buyout for Debt-Ridden Company

Soo Kim is not only the chairman of Bally’s, but also the managing partner of Standard General, a hedge fund that owns 26% of the company. In the letter, Fetters and King warn that Soo Kim is trying to take advantage of the drop in the company’s share price to buy Bally’s at a discount.

“[Soo Kim] proposes to exploit this weakness and acquire Bally’s at a fraction of its fair value, using as a source of funds Bally’s own already overstretched balance sheet,” the letter from the two Bally’s financiers reads. 

“Shareholders will be denied the opportunity to earn into what may be double the offered value per share,” Fetters and King continued, “and the incremental leverage will divert precious capital that otherwise could have been invested into the casino resorts to increase revenue, at the expense of employment and tax generation.”

Bally’s ended 2023 with $163.2 million in cash on hand, but $3.6 billion in debt. Last month, Kim announced a takeover bid, offering just $15 per share, far below the $38 per share he offered in 2022. Bally’s was trading at $13.97 per share as of Wednesday afternoon.

“It is reprehensible to use the already overstretched balance sheet of the company as a source of funds,” Fetters and King wrote. “This jeopardizes the completion of the Chicago project, putting at further risk gainful employment and tax generation in Illinois…and diminishes the company’s capacity to invest across its casino portfolio.”

K&F owns less than 1 percent of Bally’s, but the prominent venture capitalists could have influence on other investors in the company.

Bally’s Chicago Casino Project Still Lacks Funding

With Bally’s facing a mounting debt load, there are questions as to how the company will complete its proposed casino complex in the River West neighborhood of Chicago.

Bally’s has said it will spend $1.7 billion on the project. Even if it wants to scale back that ambition, it is contractually required to spend a minimum of $1.34 billion based on the city agreement signed with former Chicago mayor Lori Lightfoot.

Bally’s is far short of that target thus far. According to the company, it will have to spend about $1.1 billion more in to hit that minimum. Bally’s Chief Financial Officer Marcus Glover says there is a funding gap of around $800 million that needs to be closed before the company can break ground on the project, which it hopes to do this summer.

Bally’s temporary Chicago casino at Medina Temple has so far underperformed expectations. (Image: Joe Hendrickson/Alamy)

But there are other issues that need to be resolved in Chicago as well. Bally’s still doesn’t know where it can put its main hotel tower for the casino, as the originally planned site would have damaged city water pipes. 

In the meantime, Bally’s is operating a temporary casino located at Medinah Temple. Since opening in September, it has generated about $4.3 million in revenue for police and firefighter pension funds, far less than anticipated. 

Currently, Bally’s owns 16 casinos in 10 states across the USA as it has expanded its gaming presence over the past decade. However, Fetters and King blasted some of these efforts in their letter.

“Moon shot bets on huge, unfunded development projects, failed US online execution, casino resort properties underperforming its regional peers, an over-leveraged balance sheet with little near-term prospects for de-levering and irresponsible capital allocation decisions have driven the stock and bonds to a point of disinterest from the investing community,” the pair wrote.