Moody's changes Eldorado outlook to negative

Moody's Investors Service said it affirmed Eldorado Resorts, LLC’s B2 corporate family rating and the B2 (LGD4) rating assigned to its $168 million senior secured notes due 2019, changed the probability of default rating to B1-PD from B2-PD and revised the outlook to negative from stable following the closing of its merger with MTR Gaming Group Inc. (B3/negative).

The agency said the outlook change reflects continued declines in net revenues (down 7.2%) and EBITDA (down 27.9%) for the first six months of 2014. These trends have caused Moody's ratio of adjusted debt to EBITDA to climb to 5.1 times for the 12-month period ended June 30 from 4.4 times at the end of fiscal 2013. The agency expects EBITDA to be down slightly in the next 12 to 18 months given continued weak gaming demand trends and new supply in both the Reno and Shreveport markets.

The B2 corporate family rating reflects the company's small scale, limited diversification and reliance on one property for about 65% of its EBITDA, Moody’s said.

The rating is supported by the company’s positive free cash flow and the stronger geographic diversification of the combined company compared to either standalone operator as a result of the closing of the MTR merger, the agency said.

Moody’s said the upgrade of the probability of default rating reflects Eldorado's all-bond debt capital structure following the maturation of its secured credit facility on May 30.

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