Penn National to Sell Tropicana, Furlough 26,000 Employees

As casino companies get hit one after another, Penn National Gaming is the latest sector player to announce drastic measures and proceed with the furloughing of 26,000 employees.

Penn National Takes Tough Decisions Amid COVID-19 Crisis

With the coronavirus pandemic taking on more threatening dimensions, the world is preparing to brace the economic impact the virus will draw in its wake. For Penn National Gaming, some of the immediate actions will include furloughing 26,000 employees nationwide starting on Wednesday, April 1, in a bid to bring expenses under control.

Penn National Gaming is just one of the many companies that are faced with difficult decisions that might as well determine whether the brand can survive the oncoming economic depression. When Macau’s casinos had to close down for two months in February, Las Vegas was confident that this wouldn’t affect them.

Yet, COVID-19 has wrecked significantly more damage to the United States’ gaming sector, and the brunt is yet to come. In Nevada alone, the operator of Tropicana and the M Resort employees 3,2000 people.

Penn National Sells Tropicana and Ground Lease to Spinoff Entity

Continuing to battle the oncoming economic downturn, Penn announced on Friday, March 27, that it was selling the Tropicana and a ground lease for an upcoming project in Morgantown Pennsylvania.

The buyer is the company’s real-estate spinoff, Gaming & Leisure Properties. As to the financial details of the deal, the company will pay $337.5 million in rent credits. Jay Snowden, Penn National CEO and president explained the company’s motivation to the public, citing COVID-19 as the culprit behind the moves:

“As the global COVID-19 health crisis continues to evolve, we are navigating through this unprecedented time for our company, our industry and our nation.”

Snowden explained that the new measures were necessary due to the fact that all 41 properties across 19 states were closed down to weather the pandemic.

The CEO believes that similar to other companies in the hospitality sector, drastic measures are necessary to help preserve liquidity and guarantee the future of the company and a brighter future for all “team members, customers, shareholders and other key stakeholders.”

Penn will honor its previous decision to pay employees full wagers through Tuesday, but come Wednesday, and given the uncertainty surrounding the pandemic, the company would be forced to furlough all employees.

We Are in This Together – CEO and Board Members Help

No revenue is expected for the foreseeable future as well and that has prompted the executive team to make the difficult decision of furloughing all employees. Snowden also assured that he would take a pay cut, although the exact amount was not disclosed.

He referred to it as a “meaningful” sum and added that board members are also giving up on compensation as of Wednesday to help ride the storm together. The company would only retain 850 employees to ensure that it carries on and prepares for a possible return.

Employees will get extended medical benefits through June 30, which is a small token of good will on the part of Penn National. Similar to William Hill, the company has also established the Penn National Gaming Foundation designated to aid employees, although only $1.2 million has been raised so far, which may not yet be enough to cover 26,000 employees.

The company will also be readjusting its financial goals and let investors know what the new targets are as soon as there is clarity on the issue.