S&P lowers Revel AC loan

Standard & Poor's said it revised the recovery rating on Revel AC's first-lien term loan to 6, indicating 0% to 10% expected recovery in a default, from 3, which indicates 50% to 70% expected default recovery.

S&P also said it lowered the rating on the loan to CC from CCC.

The revised recovery rating reflects the recent $150 million increase in unrated revolving credit commitments and term loan that are senior in priority to the rated term loan, the agency said.

These factors reduced the recovery prospects for the rated term loan enough to warrant the downward revision to the recovery rating on the loan, S&P said.

The rating also reflects a view that the additional $150 million of financing provides only near-term operating liquidity as the agency said it believes the company will be able to generate sufficient cash flow to service its capital structure over the longer term.

While one of the tenets of the company's strategy is to appeal to the non-gaming customer, the property is heavily reliant on the success of its casino, S&P said.

In its first nine months of operations, Revel's gaming revenue was well below expectations and the property has generated negative EBITDA, the agency said.

S&P said it believes the property is unlikely to ramp up operations sufficiently to cover about $140 million of fixed charges in 2013, including about $130 million of interest expense, $5 million of scheduled amortization and about $5 million of capital expenditures.

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