At least one high-yield gaming analyst and one portfolio manager believe a planned $350 million junk deal by Wynn Resorts to build a Las Vegas casino called La Reve will provide an important gauge of the market's interest in buying new paper. The deal, set to hit the road after Labor Day, is sure to attract attention, if only because, in the words of one analyst, "Steve Wynn is about as close as you get to God in high-yield gaming." While gaming paper has been in favor through most of the economic slump, only one project finance deal has been sold in the sector this year. The analyst believes Wynn will be able to pull it off because his name will carry weight with investors.
Some uncertainty surrounds the deal, chiefly because of concerns that the economy could turn worse before the building is completed, says Tom Parker portfolio manager at Barclays Global Investors. Parker has not yet looked at the deal, and says it is too early to decide what price it would take to bring Barclays to the table. Nonetheless, he argues that, "if the deal doesn't get done, that means investor appetite is quite weak."
The new deal market, while always slow during the summer, has been particularly anemic in recent weeks, according to Mike Taylor, high-yield strategist at Bear Stearns. Through last Thursday, just over $2 billion in new junk paper had priced in July and August, most of which was in high-quality sectors such as healthcare and energy. That compares to $7.7 billion in July and August of last year.