S&P rates Montreign loan B-

S&P said it assigned Montreign Operating Co. LLC's proposed $375 million first-lien term loan due 2022 its B- issue-level rating and a recovery rating of 3, indicating an expectation for meaningful (50% to 70%; upper half of the range) recovery for lenders in the event of a payment default.

The company will use proceeds, along with $301 million in equity contributions from the parent company Empire Resorts Inc. (unrated), an expected $57 million capital contribution from its majority owner, and a $70 million vendor financing facility to fund the development and construction of the Montreign Resort Casino, establish an interest reserve to fund debt service through the construction period and the first four months after the casino opens, and fund transaction fees and expenses.

Although the terms have yet to be finalized, the additional $57 million capital contribution could either be in the form of equity or debt. If, once the terms of the capital contribution are finalized and S&P believes the contribution is more debt-like in nature, it said it will treat it as debt in its analysis and include it in credit measures.

The agency added that in the originally proposed financing structure earlier this year, this piece of capital was proposed to be a second-lien pay-in-kind (PIK) loan.

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