Moody’s rates Lago Resort B3; loans B2, Caa2

Moody's Investors Service said it assigned a B2 rating to Lago Resort & Casino, LLC's $255 million first-lien credit facility, consisting of a $15 million six-year first-lien senior secured revolver and a $240 million six-year first-lien senior secured term loan.

At the same time, the agency assigned a Caa2 to the company's proposed $85 million 6.5-year second-lien term loan, a B3 corporate family rating and a B3-PD probability of default rating.

The outlook is stable.

Proceeds from the $240 million and $85 million term loans, along with $15 million of vendor financing, $100 million of cash equity, and $10 million of casino operating cash flow will be used to finance the construction of the Lago Resort & Casino – a full scale casino located in Tyre, N.Y.

Moody’s said the B3 corporate family rating reflects the ground-up, debt-financed nature of this casino development project, ramp-up risk associated with most new casino projects, and the single asset profile of Lago. The B3 rating also takes into consideration the competitive market Lago will be operating in – there are five gambling facilities, including four racinos and one Native American full-scale casino within 100 miles of Lago's location.

The agency expects leverage of about 5.7 times at the end of its first full year of operations – a level considered high for a company reliant upon a single casino for its earnings.

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