S&P lowers Tropicana Entertainment

Standard & Poor's said it lowered its corporate credit ratings on Tropicana Entertainment LLC and its unrestricted subsidiary, Tropicana Las Vegas Resort & Casino LLC, to CCC from B and placed the companies' ratings on CreditWatch with developing implications.

The downgrade follows the recent announcement that the New Jersey Casino Control Commission has denied the company's gaming license renewal application, citing, among other things, the commission's opinion that management failed to appreciate the workings of the Atlantic City marketplace. Barring a successful appeal of this ruling, which S&P views as unlikely, Tropicana Entertainment will pursue the sale of the Tropicana Casino and Resort in Atlantic City.

In addition, according to the terms of Tropicana Entertainment's credit agreement, any license revocation continuing for more than five business days constitutes an event of default. Should Tropicana Entertainment lenders accelerate the loan, cross-default provisions for Tropicana Entertainment's notes and Tropicana Las Vegas' term loan would be triggered.

The agency said the developing implications of the CreditWatch listing incorporate the possibility of default along with the possibility that the company could sell the Atlantic City asset for a multiple sufficient to drive debt repayment to the point that Tropicana Entertainment would be capable of servicing its remaining debt obligations with cash flows generated from the remaining portfolio of assets.

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