"While certain casinos in Rhode Island and Maryland stand to gain from the expansion, we believe the current 'keeping-up-with-the-Joneses' mindset will only further deluge an already saturated gaming market," says Senior Vice President and author of the report Keith Foley. "The measures won't necessarily attract more customers. Rather, they will force operators to reach ever farther to attract the same number."

Although the expansion could still lead to higher overall gaming and gaming-related revenues, Foley says, without a marked improvement in the US economy revenues are not expected to result in a material improvement in the sector's profitability as customers stay home.

The measures aim to keep gamblers in Rhode Island and Maryland from spending money in neighboring states such as Massachusetts, Connecticut, New Jersey Delaware, Pennsylvania and West Virginia.

In Rhode Island, their approval is credit positive for Twin River Management Group, owner of the Twin River casino. The casino already operates video lottery terminals, but had said it could lose up to 35% of its business when Massachusetts gaming opens in the next one to two years if it wasn't able to offer table games. Twin River could begin doing so as early as next summer, giving Rhode Island a first-mover advantage over Massachusetts.

The expansion is credit negative for Penn National Gaming, Mohegan Tribal Gaming Authority and Mashantucket Pequot Tribe of Connecticut in Rhode Island, due to increased competition.

In Maryland, the state's three existing and two planned casinos can now offer table games, while voters also supported the development of a sixth casino in Prince George's County, near the densely populated Washington, D.C. area. Table games could begin in Maryland as early as next year.

The expansion in that state is bad news for Penn National, which owns and operates Hollywood Casino at Charles Town Races in West Virginia and Hollywood Casino Perryville in Maryland. Those casinos' results have already been negatively affected by the recent opening of the Maryland Live! Casino, Foley says, and the opening of a sixth casino will increase the competition even further.

Moody's research subscribers can access this report at http://www.moodys.com/research/US-Gaming-Rhode-Island-and-Maryland-Say-Yes-To-Expanded--PBC_147135.

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