Peninsula Gaming plans $1.2 billion of debt with purchase by Boyd

By Sara Rosenberg

New York, May 16 - Peninsula Gaming LLC will be getting $1.2 billion of new debt, which will mainly consist of prepayable bank loans, in connection with its acquisition by Boyd Gaming Corp., company officials said in a conference call on Wednesday.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. are leading the debt.

Proceeds will be used to refinance about $700 million of Peninsula's existing debt and help fund the cash consideration to the seller.

In addition, Peninsula has agreed to provide a roughly $144 million seller note, officials said.

The six-year PIK seller note will have a coupon of 0% in year one, 6% in year two, 8% in year three and 10% thereafter. It is prepayable at all times.

Pro forma total leverage at Peninsula will be below 6.0 times, excluding the seller note. Boyd's leverage will be pretty much unchanged at 7.3 times.

Other funds for the transaction will come from $200 million in cash from Boyd.

Under the agreement, Boyd is buying Peninsula for $1.45 billion. Plus, Boyd will have to make an additional payment of 7.5 times additional EBITDA over $105 million in 2016 should Kansas Star's EBITDA exceed $105 million in 2015.

The transaction is expected to increases free cash flow generation, which would accelerate future leverage reduction, and add over $70 million in free cash flow.

Peninsula is Dubuque, Iowa-based owner and operator of casinos and off-track betting parlors. Boyd is a Las Vegas-based owner and operator of gaming entertainment properties.

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