[ruh-oh] Restaurateur Tilman Fertitta Desperately Seeks Cash Infusion For His Hospitality Empire

Owning a sport team is not just business. But let's grant that for the sake of argument.

What kind of business is a sport team? Entertainment is the closest category I can think of. A good business is a money making business. But that shouldn't be the only thing. It should also provide good product to its customers. A business that makes its customers very unhappy is not a good business. If a business made a lot of money and made its customers very unhappy at the same time, you would call that business an exploitation of some sort, or even a scam.

An example: If you go to a restaurant that masquerades as a high class high quality restaurant with high prices for its food, but what you get is mediocre food you could have found in a local Denny's, you'd say that the owner is a cheater.

But this analogy is not even correct. If you found a restaurant serving overpriced food, you'd go to another place to eat. But a sport team by nature has an extremely high fan loyalty. Hard core fans cannot change their loyalty without feeling a huge emotional loss. An owner using customer loyalty to make money without trying to provide a good product is bad. He deserves to be hated by his loyal customers.

 

Sounds REALLY similar to Tom Hicks, who had to sell off his sports franchises once his luck ran out.

 

Retained earnings in the Balance Sheet. This is specifically used for expansion + saving business and its working capital for a rainy day such as this. He did not even have that much retained earnings to survive for a month that he had to get a loan at 12-15% and try to layoff workers or not pay? This seems like someone trying to grow business at unsustainable levels without retaining any cash. Buffett has been saying for decades, CASH IS KING for a reason. Tillmans's entire business model probably runs on unsustainable debts and over-expansion. He must be making a lot of cash through his casinos and restaurants but it seems he invested at a higher rate than collect it. Again, we can only speculate, the truth could be completely different.

 

As long as Tilman can borrow cash, everything will be fine.

Who cares if Tilman borrow 300 million at 30% interest in August and 500 million at 50% interest rate in December this year.

 

What does this have to do with my post? I’m confused. I think you’re getting emotional and not reading what I posted and to whom it was posted to. DaDa made a statement about how he is upset that he isn’t paying his 10,000 furloughed employees and instead started a $1 million dollar fund. My reply back to DaDa was that no one should be upset at what he did but rather they should be outraged at what he said and how he said it. I think we both have the same opinion on the man and his character.

 

Let’s do some simple math calculations:
10,000 employees making an average of $4000 a month would mean a $40 million payroll. With $0.00 incoming and his other payments such as rent, property tax, payroll taxes, loan payments, and whatever else I am missing puts him or any other company in a similar situation in a financial bind. So by your account he should have paid $40 million to his employees for what exactly? They’re sitting at home not working. If they came to work they would have no customers. His company is not a charity and should not be expected to pay for people when they are not working just like employees should not be expected to work for free.

If his company is eligible for the PPP loans and he takes advantage of it and we go with my math earlier he would be able to get a loan of $80 million. Assuming he stays with the guidelines he would be able to use $60 million of that on payroll and the other $20 million could be used for interest, utilities, and or rent. By Tillman’s own account he currently has a cash burn rate of $2 million a day so this would buy him only 10 extra days.

As far as having enough cash to withstand a month he obviously survived one month but the question is how long can he withstand the current business environment. It’s hard to estimate how long he can last but my guess is that he won’t be able to last 6 months of a shelter in place as it currently stands.

I stand by my statement from a couple of weeks ago that he sells the Rockets for a profit within the next year and a half.

 

he owns too much equity. the

Hes worth too much. Golden nugget is worth 2.2 billion. His equity is worth alot. He can always pull money from the casino like a financial loan to cover the cost of hospitality. Plus hes pulling out loans federally to pay all those workers. He dont have have to pay a dime back.

 

You seem to miss the important highlight of your own message, interest coverage of EXISTING LOANS. By my accounts, I did not say that he should have paid his employees who are not even working. I merely pointed out that he did not even have enough cash to handle 1 month of paying his employees which is a dangerous business model on all accounts because that means his entire empire runs on leverage and he couldn't pay his employees because he seems to have trouble even covering his existing interest payments on his massive loan as he needed emergency cash infusion. This could imply that he was probably expanding his business on more debts than he could handle.

It's difficult for me to understand how he was able to purchase Rockets by only offering less than 15% of down payment and leveraging 71% of his assets as reported by Sports 610. His standalone tangible assets can be worth less when goodwill gets wiped out due to Operating profits itself is $0 at the moment. No one can predict the future that he will be able to sell the team at a profit if he even sells at all entirely.

Again, I am only speculating. I wish him the best and his employees.

 

Net worth is just on paper friend. Golden nugget worth is based on its tangible assets + Operational income + goodwill. When there is no operational income, buyers become vultures who will only be interested in the net worth of tangible assets, like the building, when the owner is in financial distress. So just because it is worth $2.2 billion does not mean he will be able to fetch that kind of value in a recessionary environment. Besides we do not even know his liabilities which is part of the equity. And I do not believe that he will sell high cash cow businesses (restaurants + Casinos) before he sells Rockets.

 

Why would he need so much money right now? You arguing like hes gonna sell it. I bet you hes gonna have enough money and not sell the team. You're trying make an argument that hes broke and hes gonna sell but i say he is not. So is that where your argument is taking us? Hes broke and hes gonna sell? I say hes not gonna be broke and not sell.

 

You think the MAFIA gonna let this business crash? Hes a puppet for Italian MOB, they gonna make sure nothing happens to him and his team. They will pull strings and get loans for him if he needs it. You dont think the Mob bosses has political ties to get federal grants and loans for him? Hes just a puppet under the mob boss. Like it or not this team if financially linked to the italian mob you dont even know it. So hes not gonna sell this team without their permission.

 

I am not trying to make an argument that he is broke. He still has assets probably worth some millions or billions. People only see the window dressing of what he owns on paper but what is his debt? We do not know what his liabilities are that make up his total equity and clearly he seems to be in financial distress if he is looking for abnormally high-interest loans. He's definitely not looking for loans to pay salaries, businesses usually do not do that when everything is shut. It is most likely to pay his existing loans or lenders will take away 71% of his pledged assets that he used to purchase the Rockets. This is not hard to decipher.

Now if what I say has any truth, which I am clearly speculating, it might be best for Tillman to sell the Rockets in order to save his other businesses that are usually modeled as cash cows.

 

Haha yeah pay businesses first so they can pay salary and then audit and take actions later if they don't pay their employees who are most likely already laid-off?! So that if they violate they can just pay some fine or backpay and get away with it?

Not fooling anyone here. Businesses are cutting salaries or outright laying off people. Jobless people are the ones who need the money first, not trust businesses to actually pay them.

These are all high leveraged "businessmen" on life support because they took on more debt than they can chew and now wants the government to help them financially. It's really funny when "billionaires" are asking the government for financial bailouts in the name of saving employees, especially Tillman who has flaunted his $7.5 million home, private jet, 2 helicopters, $40 million yacht etc.

Not hating on the guy for his accomplishments but pisses me off when they beg the government to help them financially with taxpayer's money when they are sitting on assets worth multi-millions if not billions.

 

Now, I'm confused. My post you replied to wasn't really a criticism of your response to DD. I was just pointing out WHY Fertitta was so hated here. I said, if it wasn't for those reasons, there would have been much more sympathy for his financial trouble due to the COVID crisis.

Then you seemed to try to defend Tilman against my points.

 

They really need to make a life story of Tilman. It would probably go down with all time great like "Good Fella" and "GodFather" and we know who is going to direct the movie.

Who would we cast for Tilman? I wonder if he's a made man. I mean, his crime family was bigger than Vegas and Al Capone at one point, but they never made movies about the Galveston crime families, but they can't stop making movies about Vegas and Al Capone. That shows you how power the Galveston crime families were, they controlled everything!

 

Starting now, Rockets need Profit so that Tilman can use Rockets profit to pay interest for Landry.

Without Rockets, Landry is likely to ...

 

He is talking about saving jobs when he just laid off all his employees. Why the is government giving any money to the businesses. They are just cutting salaries and laying off people.

 

Gotta admit, it's a brilliant plan if you can get away with it.