I first looked into COAMs a couple of years ago, when a very large investor wanted to know if he should put a few tens of millions of dollars into a company involved in the business in Georgia. Before I could advise him, I had to first figure out what in the world is a COAM.
My interest was renewed this year when I was asked by another big money firm about the proposal by the largest COAM operator, Lucky Bucks, to borrow $500 million. Lucky Bucks will use $290 million to pay off existing debt, which makes sense because interest rates are now so low. But it also will use $191 million to pay a dividend to its shareholders. The remaining $19 million will go to fees and expenses.
What type of company makes so much cash that it can borrow half a billion dollars and give themselves $191 million, while not using any of it to grow the business?
What is a COAM? The letters stand for Coin Operated Amusement Machines, but the only ones of interest to gamblers, operators and investors are the Class B COAMs in Georgia.
OK, so what are Class B COAMs? The short answer is they are VLTs, with a few weird twists.