Ameristar Casinos extends consent solicitation, seeks several changes; rush annoys market

By Cristal Cody

Tupelo, Miss., March 20 - Some investors are concerned with the short time-frame Pinnacle Entertainment, Inc. gave in its consent solicitation for Ameristar Casinos, Inc.'s outstanding 7½% senior notes due April 15, 2021 and the proposed waivers and amendments the solicitation seeks.

Ameristar Casinos announced on Wednesday it would extend the expiration date of the consent solicitation seeking consents from holders of $1,038,000,000 of the notes for waivers and amendments.

The consent solicitation, which was previously scheduled to expire on March 22, will be extended to March 27.

The initial consent solicitation record date was Friday.

For many investors, the custodian bank requires a consent two days in advance, and a more reasonable consent deadline would have been March 29, according to Covenant Review, an independent credit research firm.

"So we know that some of our subscribers only received the document yesterday, and today is their practical deadline to consent," Covenant Review said in a report on Wednesday that urged bondholders to reject the solicitation. "That is ridiculous and our subscribers have told us they are pretty angry about it."

Some investors have noted that the "upcoming proposed amendment sounds pretty extreme and the consent payment sounds rather slim," the firm said.

Pinnacle Entertainment, a hospitality and entertainment company based in Las Vegas, announced in December it would acquire Las Vegas-based Ameristar Casinos. The company was expected to launch a consent solicitation to avoid a 101% offer for the Ameristar bonds, Covenant Review said.

Ameristar Casinos last tapped the tranche on April 19, 2012 when it sold $240 million of the notes (B3/B+/) at 103 to yield 6.879%.

The notes were quoted last trading in the 109.5 area, a market source said on Wednesday.

Bondholders may want to reject the consent for other reasons, in addition to the short consent timeframe, Covenant Review said.

Some of the changes Pinnacle seeks in the consent include the following:

• That the change-of-control put be waived;

• A covenant waiver, where any and every other restrictive covenant is waived so long as the parent's pro forma consolidated interest coverage ratio is at least two to one;

• Amendment of the restricted payments covenant to allow all payments to Ameristar shareholders and other restricted payments in connection with the merger so long as the ratio is at least two to one; and

• Remove the current restricted payments covenant that requires Ameristar to prove its restricted payment calculations to the trustee on a quarterly basis.

"Even from this short list, it is very clear that Pinnacle would get a lot of value from these covenant changes, and you get paid a pittance," Covenant Review said in the report. "Accepting this offer could send a bad signal to the banks that the new clearing price for major covenant changes is a joke."

The consents are not a condition of the acquisition. If the consent fails, Pinnacle Entertainment is expected to make Ameristar an unrestricted subsidiary under the company's indentures.

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