Wall Street confirms gaming industry comeback
By Paul
Moody’s a prominent Wall Street debt-rating agency yesterday upgraded its outlook for the gaming industry from negative to stable, after the industry had been downgraded following the September 11 terrorist attacks.

Some gaming companies individual debt ratings have yet to climb back to pre- 9/11 ratings, according to a report by Moody’s Investors Service in New York.

'In a couple of those cases, (companies) were very much on the edge to begin with,' said Moody's analyst and report author Peggy Holloway. 'Of the companies that were downgraded, Sept. 11 did put them back enough' to warrant maintaining a lower debt rating, she said.

Moody's ratings aim to forecast performance over 18 to 24 months. 'It's not likely ratings will go back up very quickly,' she said.

As expected, the riverboat gambling sector has bounced back to a normal level, while markets like Las Vegas, heavily dependent on air travel for their patrons, have made a slower comeback. This was borne out by companies with both riverboat and Las Vegas casinos.

Boyd Gaming's riverboat business surged back much faster than its Las Vegas properties following Sept. 11, company spokesman Rob Stillwell said.

Harrah's Entertainment Inc. responded to a drop-off in riverboat business by aggressively marketing to loyal customers -- a move that paid off with higher returns in the fourth quarter than the same period a year ago, said spokesman Gary Thompson.

Harrah's Las Vegas casinos were hurt by fall in leisure tourism following the attacks but have since returned to normal, he said.

The Moody's outlook covered 41 gaming companies and $36.6 billion in outstanding debt. About 58 percent of these companies' debt issues are classified as non-investment grade, or 'junk,' for their higher degree of investment risk. Even larger companies such as MGM MIRAGE, Mandalay Resort Group and Park Place Entertainment Corp. are on the margins of non-investment-grade ratings. Slower potential earnings growth and the possibility that increases in development spending could preclude debt protection measures call for such 'speculative grade' ratings, Moody's said.

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