S&P ups Eldorado; rates facilities BB, notes B-

S&P said it raised its corporate credit rating on Eldorado Resorts Inc. to B+ from B and removed it from CreditWatch, where it was placed with positive implications on Sept. 20.

At the same time, the agency assigned BB issue-level ratings to Eldorado's proposed $300 million revolving credit facility due 2022 and $1.45 billion term loan B due 2024. The recovery rating is 1, reflecting an expectation for very high (90% to 100%; rounded estimate: 90%) recovery for lenders in the event of a payment default.

S&P also assigned a B- issue-level rating to Eldorado's proposed $375 million in senior unsecured notes due 2025. The recovery rating is 6, reflecting an expectation for negligible (0% to 10%; rounded estimate: 0%) recovery for lenders in the event of a payment default.

The borrower of the credit facility will be Eldorado Resorts if the credit facility is funded on the date the acquisition of Isle and the repayment of its debt, and the repayment of Eldorado's existing term loan are completed. Otherwise, the borrower under the credit facility will initially be Eagle II Acquisition Co. LLC, a wholly owned subsidiary of Eldorado, and Eldorado will assume Eagle's debt once the acquisition closes.

Eagle will also initially be the issuer of the proposed notes, and Eldorado will assume Eagle's obligations under the notes upon close of the acquisition.

S&P affirmed its B- issue-level rating on Eldorado's $375 million senior unsecured notes due 2023, which will remain in the capital structure once the acquisition closes. The recovery rating was revised to 6 from 5 because the increase in secured debt in the proposed capital structure results in lower recovery prospects for unsecured debt holders.

Eldorado plans to use proceeds from the new term loan and notes, along with equity issued to Isle of Capri shareholders, to finance its acquisition of Isle, refinance Eldorado's term loan, redeem Isle's existing debt and for related transaction fees and expenses. The agency will withdraw its ratings on Eldorado's term loan and Isle's notes once they are fully repaid.

"The upgrade reflects our view that Eldorado's business risk position, pro forma for the completion of the acquisition of Isle, will be stronger than Eldorado's on a stand-alone basis, since the acquisition increases Eldorado's scale, expands its geographic diversity, reduces its concentration in more challenged markets, and improves its profitability, given Isle's EBITDA margin is higher than Eldorado's," S&P credit analyst Ariel Silverberg said in a news release.

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