Noting the stellar stock performance of a number of gaming companies, fixed-income analysts say new equity offerings could be forthcoming, which may well increase investor sponsorship in an already hot sector. Andrew Zarnett, gaming analyst at Deutsche Banc Alex. Brown, says that funds raised via equity sales would probably be used to pay down bank debt and deleverage, making their bonds tighten further as cash flow and financial flexibility ratios increase. Though the sector has performed extraordinarily well, Jacques Cornet, gaming analyst at CIBC World Markets, believes new equity deals could cause another 25-50 basis points of tightening in what has already been a tight sector. Gaming yields were 504 basis points over Treasuries last week, in from 588 at the end of March, though slightly wider than the 483 over on June 30, according to Merrill Lynch indices.
Zarnett notes that shares of Argosy Gaming, Alliance Gaming and Ameristar Casinos have all performed well in the last year, making them plausible candidates to offer additional equity. Dan Marshall, Argosy's treasurer, says the gaming company has nothing to announce until it receives regulatory approval for its acquisition of Horseshoe Joliet. (That approval was widely expected to come as BW went to press late last week.) Ameristar and Alliance executives did not return calls.
Argosy 10 3/4% of '09 (B2/B+) tightened from 447 basis points over Treasuries in late March to 432 last week. Alliance 10% of '07 (B3/B-) have moved in from 777 to 547. Ameristar 10 3/4% of '09 (B3/B-) moved from 558 to 485, but have been flat over the last month.