Boyd Gaming Faces Very Strong Headwinds

The casino sector has been battered. Of these stocks, Boyd Gaming (BYD) appears to face some of the strongest headwinds.

Boyd's 52 week high was $21.65. It is currently trading at $3.10. Last week, Fitch downgraded Boyd Gaming's default ratings (from BB- to B+), senior credit facility ratings (from BB to BB-) and senior subordinated debt ratings (from B+ to B-). Fitch expects the stock to face market pressure through 2010.

According to the Las Vegas Review Journal, Boyd has a debt load of $2.6 billion, $2.1 billion of which becomes due in 2012. The company made a troubling announcement that it only had $98.2 million in cash as of December 31, 2008.

The numbers highlight the company's downturn year over year. For the 4th quarter of 2008, the company had a loss from continuing operations of $220.8 million, or $2.51 per share, compared to income of $31.0 million, or $0.35 per share, in the same period last year. Net revenues for the 4th quarter of 2008 were down 11.7% YOY (Call Transcript).

Boyd made an unsolicited offer of $950 million to Station Casinos (STN) for the majority of its assets. Station Casinos rejected the offer on March 3, 2009 in favor of Station's own restructuring plan through voluntary Chapter 11 bankruptcy proceedings.

Boyd's market cap is now below $300 million, which is surprising for a company with a $2.6 billion debt load. It faces a very challenging year ahead.

Disclosure: Author does not own the stock.

Comments

[investor88:]

Agree the casino sector is in trouble with companies in teh sector going under or about to. No time to be fooling around this sector yet.

Mar 08 11:35 AM

[yellowhoard:]

With the exception of Wynn, I think all of the casino operators will go to zero. They face much higher borrowing costs and declining revenue for years to come. Factor in surging energy costs and labor problems, and you can see a perfect storm.

Mar 08 01:14 PM

[aceofspartan:]

Poor research job on this one. Boyd has a $2 billion revolving line of credit. Other than the write down impairment expenses for the last quarter, BYD had more than sufficient EBITDA to pay off the interest on its debt. The fact that the earliest debt does not mature until 2012 shows that this is one of the better gaming companies to own. It is amazing to me that people write articles without understanding that the goal is to simply survive this downturn which will last through 2010. After that, the BYD equity structure will be the same as it is today, while the bondholders will own Stations, Harrahs, MGM Mirage, Tropicana etc. BYD is a "to own" stock in an otherwise lousy gaming sector. Book it.

Mar 08 07:20 PM

[Richard Col...:]

I agree with aceofspartan that poor research done on this one and I might add that is usually the case where Cramer and the bankrup banks don't take the time to really study the subject they are upgrading or downgrading.

If they had the forsight to see what the gaming companies (LVS,MGM,Wynn and Boyd)are building and the profits and rewards will be when they have finished,

Of course, when all the gaming stocks start to rise again they will all tell you to buy,buy,buy but the price will be appreciaby higher.

Dan Kowkabany

Mar 09 11:02 AM

[Richard Col...:]

Moodys, Fitch, etc. are just about worthless __ more often than not a negative factor as part of private investor's research.
Investors need to study the publicly traded corporation's fundamentals for themselves.

When the Wall Street toilet is flushed (...it's been backing-up for years), this is some of the debris that should go. The SEC needs to be hireing "plumbers" right now.

Richard Collins
Claremont, CA

Mar 09 01:14 PM

[manof1002vo...:]

Living in Las Vegas, anyone can tell you that gaming stocks will continue to fall. It's a ghost town here and unemployment is up to 10% and climbing mostly due to casino and building layoffs...
Find a good tech or commodity.

Mar 09 05:14 PM

[yellowhoard:]

You're right. What we've seen so far with the casino stocks is merely the courtesy flush.


On Mar 09 01:14 PM Richard Collins; Claremont, CA wrote:

> Moodys, Fitch, etc. are just about worthless __ more often than not
> a negative factor as part of private investor's research.
> Investors need to study the publicly traded corporation's fundamentals
> for themselves.
>
> When the Wall Street toilet is flushed (...it's been backing-up for
> years), this is some of the debris that should go. The SEC needs
> to be hireing "plumbers" right now.
>
> Richard Collins
> Claremont, CA

Mar 09 06:40 PM