Isle of Capri Casinos (ISLE)

TMFPhila (98.63) Submitted: 7/02/08 4:04 PM : Start Price: $4.30 ISLE Score: -60.67

This company is in real trouble as long as gas prices stay high. Over 75% of its revenues come from states (MS, LA, IA, and MO) where a good portion of residents are putting at least 6% of monthly income into gas. Not to mention IA has been ravaged by floods. For background: http://www.usatoday.com/news/nation/2008-07-01-small-town-gas_N.htm

Not only that, but the balance sheet and cash flow statements are abysmal. S&P has their bonds a B+(negative) already and with an interest coverage ratio (EBIT/interest expense) of just 0.5x, I wouldn't be surprised if they were downgraded even further. A drop to CCC wouldn't be out of the question, and that would add at least 2 full percentage points to any new debt they would need. Should a downgrade spells disaster for any company that needs to refresh its long-term debt load.

Recently appointed (3/08) CEO James Perry has a lot of work on his hands here. Until oil prices come down (ha!), this is one to avoid.

Report this Post Replies: 0 | Reply