Tropicana makes $40 million debt repayment but still violates leverage covenant

By Jennifer Lanning Drey

Portland, Ore., Nov. 13 - Tropicana Entertainment LLC said despite paying down its credit facility by $40 million during the third quarter, the company was not in compliance with the facility's leverage ratio covenant at the end of the quarter.

Company management had expected to be in compliance with the covenant; however, a late-stage calculation error caused Tropicana to be above the maximum ratio, John G. Jacob, Tropicana's chief financial officer, said during the company's third-quarter earnings conference call held Tuesday.

"Had we known at Sept. 30, we could have paid down debt another $15 million and we'd be in compliance today," Jacobs said.

The company reported a leverage ratio of 7.53, and the credit facility covenant permits a maximum leverage ratio of 7.50.

Tropicana is preparing to initiate discussions to seek a waiver from its lenders and may also seek to amend certain terms in the credit facility.

"We recognize our commitment to our lenders and our debt holders. We understand the situation and are going to do what needs to be done to provide a stable capital structure going forward," William Yung III, chief executive officer of Tropicana, said during Tuesday's call.

Following the debt repayment, Tropicana had a $1.3 billion balance outstanding on the credit facility. The company had zero drawn on its revolver and does not expect to make a draw on the facility in the fourth quarter, according to Jacobs.

The company's total long-term debt stood at $2.7 billion at the end of the quarter, while its unrestricted cash balance was $113.4 million, according to its preliminary earnings release.

During the third quarter, the company suffered from the effects of increased competition in several of its key markets, particularly Atlantic City.

For the quarter, Tropicana expects to report a consolidated net loss of $21.0 million, compared with net income of $15.6 million for the third quarter of 2006. However, the company said performance during the two periods is not directly comparable due to its January acquisition of Aztar Corp., which materially changed the composition of its business.

Tropicana expects operating results to improve as it completes the transition of the properties acquired from Aztar, Yung said.

The company's focus related to the transition is now shifting from cost savings to marketing.

Tropicana is a Fort Mitchell, Ky.-based casino operator.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.