S&P lowers East Valley, rates notes B

Standard & Poor's said it lowered East Valley Tourist Development Authority's corporate credit rating to B from B+ and assigned a B rating to the authority's $275 million senior secured notes.

The outlook is stable.

The authority is an instrumentality of the Cabazon Band of Mission Indians. Proceeds from the issue, along with internally generated cash flow, will be used to refinance existing debt, to build a full-service spa and 150 additional hotel rooms, to make improvements to the existing casino and to fund various payments to the tribe.

The agency said the downgrade reflects its expectation that continued economic moderation, particularly related to the real estate credit crunch and elevated gas prices, has the potential to affect spending by local customers. In addition, considering the proposed capital structure and the authority's investment schedule, S&P expects credit metrics to be weak over the intermediate term.

The B corporate credit rating reflects the authority's narrow business focus operating in a single market, the existence of well-established competition, the potential for expanded competition and the substantial expansion of the business beyond its previous scope, S&P said.

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