Melco Soothes Credit Concerns

This is undoubtedly a tough market for all stocks. But I feel the negativity on Melco has reached its low. At $11.50, the risk/reward of the stock is very positive. So long as something doesn't go wrong with the credit facility, I see shares moving to the upside.

By 2010, Melco is expected to have three casinos up and running in Macau, and I expect the company to grab a significant share of the overall Macau gaming market, where growth has been tremendous.

Home Solutions Plunges

In other Bricks and Mortar mock portfolio news, Home Solutions of America(HSOA Quote) shares were sinking 22% Friday to $3.16.

Earlier this week, Home Solutions disclosed a major related-party transaction and warned that it has likely violated certain covenants of a credit facility. It also said the Securities and Exchange Commission and Nasdaq made informal inquiries into the company's public disclosures.

As a reminder, I've been flagging the stock as overvalued since late April. The stock has since fallen 37%.

On Friday, the company said it has not defaulted on its credit line and is still able to borrow under the facility. However, lenders have still not approved the resolution of a note payable that relates to the company's purchase of its Fireline subsidiary last year.

Home Solutions plans to scrap a note payable due to Brian Marshall, who owned Fireline and is now Home Solutions' largest shareholder and a company executive, in exchange for letting Marshall collect certain accounts receivable related to Fireline.

The company said Friday that it is in "advanced discussions with its lenders to receive a waiver." If the lenders do not consent to the agreement, then the company will seek to restructure the lending pact in order to comply with the covenants.

"We have an excellent relationship with our lenders and are confident that we will reach a speedy resolution," said Frank Fradella, Chairman and CEO of Home Solutions, in the statement. "However, if we are unable to, we would restructure Marshall's agreement to avoid an event occurring which could trigger a default."

The company also said it is conducting an independent review of all related-party transactions, such as the ones with Marshall. Home Solutions' quarterly report this week revealed that one of its $100 million contracts was with a company that is 50% owned by Marshall.

Bricks and Mortar Portfolio A Look at How Nicholas Yulico's Picks Have Performed
	Rating Date	Price at Rating	Rating	Current Price*	Return**
Brookfield Properties (BPO)	1/23/2007	$28.67	Own	$22.47	-21.6%
Global Real Estate ETF (RWX)	1/23/2007	$64	Own	$56.35	-12.0%
Ryland (RYL)	1/23/2007	$56	Flag	$31.15	44.4%
Trump (TRMP)	1/23/2007	$17.50	Flag	$6.56	62.5%
Penn National (PENN)	2/6/2007	$45.56	Own	$55.49	21.8%
Hilton (HLT)	3/2/2007	$34.69	Own	$43.92	26.6%
Melco PBL (MPEL)	3/12/2007	$15.46	Own	$10.10	-34.7%
Home Solutions of America (HSOA)	4/24/2007	$4.98	Flag	$4.05	18.7%
Starwood Hotels	7/12/2007	$72.37	Own	$54.15	-25.2%
Average Total Return, Unweighted					8.9%
	Close At Start of Portfolio			Current Value
S&P 500	1427.99			1411.27	-1.2%
U.S. MSCI REIT Index	1140.36			924.71	-18.9%
*(8/16/07 closing prices) **For "flagged" stocks, a drop in price is tracked as a positive for the portfolio, and a rise in price is a negative.

'Bricks and Mortar' is a mock portfolio meant to generate investing ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.