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Moody's rates Resorts International loans B2, B3
Moody's Investors Service said it assigned a B2 rating to Resorts International Holdings LLC's $75 million first-lien senior secured revolving credit facility due 2010 and $585 million first-lien senior secured term loan B due 2012, and a B3 rating to the company's $400 million second-lien senior secured term loan due 2013.
Moody's also assigned a B2 senior implied rating, a Caa1 long-term issuer rating and an SGL-3 speculative grade liquidity rating. The outlook is stable.
Proceeds from the new bank facilities, along with a $338 million cash contribution from Colony Capital LP, a private equity fund, will be used to fund Colony's acquisition of Harrah's East Chicago and Harrah's Tunica from Harrah's Entertainment, and the Atlantic City Hilton and Bally's Saloon Tunica from Caesars Entertainment. Under the terms of the sale, Harrah's will receive about $627 million and Caesars Entertainment will receive $612 million.
The ratings consider Resorts International's high pro forma leverage and need to reduce debt/EBITDA in order to maintain its B2 senior implied rating. The ratings also reflect the limited growth prospects of the Tunica, Miss., gaming market, which will account for more than 20% of the company's total property-level EBITDA, as well as the heightened level of competition that has occurred in the Atlantic City market since the Borgata opened, Moody's said.
Positive ratings consideration is given to the significant cash contribution from Colony, which represents about 30% of the company's initial capitalization, the agency added. Also considered is Colony's successful track record in operating and turning around gaming assets.
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