Eric Green, director of research and a senior portfolio manager of around $500 million in high-yield bonds at PENN Capital Management, is looking overseas to find value in the gaming sector. "There have been a lot of attractive deals over there. We recently got into the Galaxy Casino financing deal; they are building casinos in Macau," Green said. He explained that Macau is building its own version of the Las Vegas Strip, the Cotai Strip, which is set to open in 2007.
Along with Galaxy, others that have built or are building casinos there include MGM, Las Vegas Sands and Stanley Ho, who has a government-granted monopoly on the gambling industry in Macau. "It's a fantastic demographic for the gaming industry over there," Green stated. "They gamble many times more than people over here and 25% of the world's population is within a few hours flight." Closer to home, Green has bought bonds of Majestic Star, which recently purchased Trump property in Indiana. "We've been buying bonds in Majestic as a result and to make things better, they are going to finance the transaction subordinated to existing bonds. The bonds that we already held went up to BB," he said.
Green said he has also seen some value lately from bonds that are not within the gaming sector. "We've been dipping our toe into the airline sector by looking at American Airlines. We've seen some good looking names in the packaging sector as well, such as Abitibi, which is a newsprint paper packager," he said. Additionally, Green has bought into Finlay Fine Jewelry, which is the jewelry chain for Macy's/Federated Department Stores. "We saw those bonds falling and then they suddenly became attractive again." Finally, in the media sector, Green has been interested in bonds of Paxson Communications.
Green's benchmark is the Merrill Lynch High-Yield Index. His duration is around four years.