Royal Caribbean Floated As Total Return Bet Against Gaming

  • 10 Nov 2002
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A high-yield gaming and leisure analyst is recommending Royal Caribbean's bonds to investors looking to pick up additional yield versus the tight-trading gaming sector. John Maxwell, head of high-yield research at BNP Paribas, says the cruise operator is seeing a continued rebound in spite of the soft economy, as it recovers from last year's Sept. 11-related woes.

Last Monday, Royal Caribbean's 8.75% notes of '11 were bid at 87--a roughly 11.25% yield, while most gaming credits were trading closer to 10%. Maxwell sees a potential five-point improvement in Royal Caribbean paper. "If you believe gaming is trading at an appropriate price, Royal Caribbean's bonds should be in the low 10% range," says Maxwell. However, war with Iraq or renewed terrorism in the U.S. could change his outlook, he warns.

Glen Reid, who focuses primarily on Royal Caribbean's equity securities for Bear Stearns, notes that high capital expenditures may also be an issue for bondholders, in addition to event risk. The company will spend $2.4 billion on capex from this year through 2004, he says--which is one of the reasons he is "not overly excited" about the stock. The whole industry is bringing new ships to market, which is putting pressure on pricing, he says. "But, longer term, once capacity slows down, these will be very strong free cash flow companies," says Reid.

  • 10 Nov 2002

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 120,318.45 348 12.72%
2 Bank of America Merrill Lynch 104,269.08 299 11.02%
3 Wells Fargo Securities 88,761.07 266 9.38%
4 JPMorgan 69,240.12 209 7.32%
5 Credit Suisse 51,560.77 157 5.45%