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U.S. Resort Firm Takes Short-Term Punt On I-Rates

Mandalay Resort Group, a casino resort operator, has entered two interest rate swaps, totaling USD475 million and maturing in December 2005 and in February 2006, which take the view that interest rates will not rise as rapidly as the curve is predicting in the short-term. Les Martin, v.p. and chief accounting officer in Las Vegas, said the fixed-to-floating swaps were tied to debt issues for accounting regulation reasons.

The swaps were executed to hedge the firm's short-term interest rate exposure as well as aid in managing the fixed-to-floating ratio of Mandalay's debt portfolio, Martin added.

Mandalay had initially entered two swaps in the middle of last year, totaling USD975 million, for hedging purposes, according to Martin. Last October, the company unwound these to benefit from the options' deep in-the-money position, he added. Martin said it was the first time the firm had unwound a swap. He declined to name the counterparties of the swaps.

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