The company that built its fortune on riverboat gambling is sailing into new waters.

Isle of Capri Casinos Inc. operates the most riverboat and dockside casinos in the world, but it has never undertaken a project as ambitious as the one it is proposing in Pittsburgh.

		Isle of Capri Map of Casino Locations

The $250 million casino would be the 13-year-old gambling operator's largest, not only in number of slot machines -- 3,000 to start -- but also in projected revenue and earnings. But making the project even more aggressive is Isle of Capri's pledge to provide $290 million for a new arena for the Pittsburgh Penguins, its partner in bidding for the lone state license available for a casino within the city of Pittsburgh.

"It would be ambitious compared to other projects we've done," said Tim Hinkley, Isle of Capri's president and chief operating officer.

The company believes it is a gamble worth taking.

Mr. Hinkley estimated gross revenues at more than $400 million a year and said that, even after adding in construction costs and the 54 percent state tax on slots revenue, the Pittsburgh casino could still turn a profit.

History of rapid growth
Aggressive strategies are nothing new for a company that got its start in Biloxi, Miss., in 1992, after founder and chairman Bernie Goldstein yanked his money-losing casinos out of Iowa and floated them down the Mississippi River to the Gulf Coast.

An Iowa scrap metal dealer and river freight transporter, Mr. Goldstein has since parlayed that one Biloxi riverboat into a network of 15 casinos, most of them based in the Mississippi Valley. After starting with 400 employees and $50 million in revenue in its first year, his company has grown to 11,000 workers and $1.1 billion in gambling revenues.

It operates four casinos in Mississippi, three in Louisiana, three in Iowa with one under construction, two in Colorado, and two in Missouri. It also runs a casino in the Bahamas and the Pompano Park harness racing track in Florida.

Over the years, the Biloxi casinos -- there are 10 -- have generated $611 million for the state, $185 million for the city, and $73 million for city and county schools. Biloxi Mayor A.J. Holloway said Isle of Capri, which leases land from the city, probably generates more in gambling and property taxes than any other operator.

State Rep. Bobby Moak, chairman of the Mississippi House's gaming committee, said Isle of Capri was one of the first to get a casino up and running in Biloxi after Hurricane Katrina, and continued to pay its workers even after the hurricane shut down its operations for months.

"In Mississippi, Isle of Capri is pretty much to a standard that we can judge others by in the state," he said.

In at least one respect, Pittsburgh is no roll of the dice for Isle of Capri.

Since its inception, the company has singled out mid-sized markets in charting its growth, looking for areas with limited competition and high investment returns.

"They have a company direction to look at regional markets," said Paul Girvan, managing director of the Innovation Group, which helped in crafting Pennsylvania's slot machine law.

But with Isle of Capri's fast expansion has come high debt, a factor that has raised concerns on Wall Street and from the Illinois Attorney General Lisa Madigan, who said the increased leverage could raise long-term operating concerns.

Both Standard & Poor's and Moody's Investors Service put Isle of Capri on credit watch after Katrina, which destroyed the gambling operator's Biloxi casino and a casino barge under construction.

With the hurricane damage and one-time charge resulting from a $14 million lawsuit settlement, Isle of Capri reported a $4.2 million loss for the quarter ending in October.

In December, Standard & Poor's removed the credit watch, affirmed Isle of Capri's BB-rating but retained a negative outlook, citing the company's increasing debt in light of announced expansion plans.

Michael Scerbo, a director at Standard & Poor's, said he expects the company to reap the benefits of its investment strategy over the next few years as new properties or expansions begin to make money.

He described Isle of Capri as "a healthy company" and said the BB-rating is "right in the middle" for gambling operators. He added that Isle of Capri, with both riverboat and land-based holdings, is more diversified than many gambling companies.

For Pittsburgh, Isle of Capri said it already has received a commitment from the Toronto-based CIBC World Markets, an international investment banker, to underwrite the arena and casino.

"Their financing is very solid," Penguins President Ken Sawyer said. "They are a major player. We made sure of that."

He said the Penguins had discussions with about a dozen casino operators before deciding on Isle of Capri. The company became its operator of choice because it was one of the largest players in the industry, had great success at winning licenses, and offered to build the city a new arena with a commitment on the financing, Mr. Sawyer said.

"They were the best candidate for us. It was important for us for someone to step up in a big way and make a dramatic offer like the arena," he said.

Share of troubles
Over the years, Isle of Capri and its predecessors have had their share of run-ins with regulators, public officials, and others, but the history seems to be no different than that of any of the other operators in an industry that's so highly regulated that you "get fined for blowing your nose," as Mr. Sawyer put it.

"Every company is going to pay little regulator fines here or there. I'm not aware of any major issues with them. They operate in a lot of jurisdictions," said Joseph Weinert, vice president of Spectrum Gaming Group, an industry consultant.

In December, Isle of Capri paid $14.35 million in Jefferson County, Missouri, to settle a lawsuit after ditching plans to build a casino in Kimmswick. The company also ended up being fined $250,000 by the Missouri Gaming Commission for making four misrepresentations in its application for the casino.

Executive Vice President Allan Solomon said Isle of Capri decided to drop the project for several reasons, including opposition from Kimmswick residents. He said the misrepresentations cited by the gaming board involved the status of permits needed for the project and were unintentional.

The operator also paid a $377,500 fine in 1999 to settle claims brought by the U.S. Treasury Department against two of its Mississippi casinos. The government said casinos in Biloxi and Vicksburg failed to report 75 currency transactions larger than $10,000 in 1993 and 1994 as required by law. Mr. Solomon said the fines involved "unintentional violations" that hit other gambling operators as well.

In 1993, Casino Cruises Inc., a company run by Mr. Goldstein, was fined $255,000 by the Illinois Gaming Board after he was accused by the board of helping the Par-A-Dice Riverboat in East Peoria buy overpriced casino equipment from an unlicensed dealer owned by Mr. Goldstein's relatives.

Mr. Solomon said the issue involved "minimal type dollars." He said Mr. Goldstein was not personally involved in the matter but that he and his family agreed to pay the fine to get it behind them. Casino Cruises paid the bulk of the fine.

Last year, Isle of Capri bid $518 million to win an auction for Illinois' final casino license. The license, held by Emerald Casino Co., was auctioned after Emerald filed for bankruptcy. But the victory didn't last long. The Illinois Gaming Board found that Emerald had misled the state about its ownership and committed other infractions. It revoked the license, in essence canceling Isle of Capri's winning bid. The company intends to pursue the license.

All of Isle of Capri's casinos have a Caribbean theme. Pittsburgh's proposed casino would retain that trademark flavor with some upgrades.