The bond price of gaming companies damaged by Hurricane Katrina dropped over fears the casinos would take a long time to recover from the storm. Two gaming firms hit hard were Pinnacle Entertainment and Isle of Capri. Pinnacle Entertainment's bonds dropped three points to 102, while Isle of Capri's bonds fell a point to 98. The casinos' loans saw mild price fluctuation. Isle of Capri's loans were trading flat at 101, while Pinnacle's term "B" loan dipped to 100.875 from 101.250.
"We're worried about the casinos on the Gulf Coast because of the storm," said one trader. "There has been a lot of bond price fluctuation." Another added, "Any casinos that have operations in Mississippi are volatile."
Pinnacle Entertainment has two properties in Louisiana and Mississippi that have been damaged by the hurricane. In a press release, it said its Boomtown New Orleans casino in Harvey, La., "has sustained minor to moderate damage," while its Casino Magic Biloxi property in Biloxi, Miss., was badly damaged. None of the company's other properties have been damaged by the bad weather. Isle of Capri officials could not be reached for comment.
Pinnacle said it is well insured and has business interruption insurance, which protects it against loss in revenues from the shutdown of its casinos. But one bond trader shrugged off the importance of the insurance. "It has insurance for business interruption, but what happens when the casinos reopen? The highways in Biloxi are under water, the houses are damaged. Who is going to back there when the economy comes back?"
Hurricane Katrina has caused widespread destruction across areas of Louisiana, Mississippi and Alabama. The Federal Emergency Management Agency said hundreds of thousands of people are without power, and it may be days or weeks before power and other utilities are restored.