Trump bondholder? You're fried!

I have to confess a sneaking admiration for the Donald. Trump Entertainment has announced that it will not make a scheduled interest payment on its $1.25 Bln note in order to "conserve liquidity". The article skates over the fact that there is probably little liquidity left to conserve, but full credit to Trump for keeping his own net worth out of the mess.

As with many other industries, the gambling/hospitality sector got into a heady (but ultimately painful) cocktail of leverage, real estate and hubris. Trump's issues shouldn't come as a surprise, given the recent troubles of Las Vegas Sands. Interestingly (at least in Macau), Steve Wynn's operation is relatively healthier, but that's probably due to its different target market.

Whilst it is true that people still gamble in a recession, the industry can't insulate itself completely from the real world. As a result, there are several prime property assets that will be on the block shortly.

The best trade to do is probably to buy the senior debt on assets you like. The worst case scenario: things recover, but you locked in a good yield. Best case: equity holders hit the wall, and you get your paws on a trophy asset. Faites vos jeux...