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Bear Stearns: Strong High Yield Gaming Market Could Lead to Expansion

1 February 2001

NEW YORK--(Press Release)-- Following a prolonged period of weakness in the bond market, the high yield gaming sector continues to show strength, according to Jason Ader, Bear Stearns senior managing director and high yield gaming analyst. The high yield market has enjoyed a 6.27% return through January 25, according to the Bear Stearns High Yield Index.

In addition, year-to-date inflows into high yield gaming funds have totaled $2.0 billion compared to approximately $12 billion in net outflows for all of 2000.

This solid improvement could allow companies to follow through on either undeveloped plans or new initiatives designed to increase their rate of growth. ``Last year's weak high yield market curtailed many plans for expansion in the industry,'' said Ader. ``Now, however, the sentiment is turning around and that avenue to capital is now open.''

Opportunities in Vegas

With capital available in the high yield market, many dormant projects and new initiatives in Las Vegas stand a better chance of reaching completion, according to the Bear Stearns analysis. ``This is a good sign for those looking to expand in Vegas,'' said Ader. ``This could help a number of projects move from the drawing board to reality.'' Among those projects that should benefit from increased access to capital, are:

Steve Wynn's planned resort at the Desert Inn

The proposed San Francisco Dreams resort

The Palm resort on Flamingo Road being developed by the Maloof family

The development of the vast parcel of land controlled by World Port Resorts across from Mandalay Bay

More Capital, More Competition

Not every market will be as adept at handling expansion as Las Vegas, however. Many of the major gaming regions in America are already saturated, and further expansion may only serve to take share from existing players. ``While there is plenty of desire for expansion in these areas, there may not be room for much more,'' said Ader.

Markets such as Tunica and the Gulf Coast in Mississippi; Laughlin and Reno, Nevada; Southern Indiana; Quad Cities, Iowa and New Orleans and Shreveport, Louisiana are most vulnerable to increased competition according to the Bear Stearns analysis.

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