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S&P rates Lago Resort loans B+, CCC+
Standard & Poor's said it assigned a B- corporate credit rating to Lago Resort & Casino.
The agency also said it assigned a B+ rating and 1 recovery rating to Lago's proposed $15 million first-out revolving credit facility and $240 million senior secured first-lien term loan facility due 2022.
The 1 recovery rating indicates 90% to 100% expected default recovery.
S&P also said it assigned a CCC+ rating and 5 recovery rating to Lago's proposed $85 million senior secured second-lien term loan facility due 2022.
The 5 recovery rating indicates 10% to 30% expected default recovery.
The outlook is stable.
The proceeds, along with about $100 million of equity financing from the company's owners, $15 million vendor financing facility and $10 million of operating cash flow, will be used fund development and construction of the Lago Resort & Casino, fund the license and construction cost deposit payable to New York state, establish an interest reserve to fund debt service through the construction period and the first three months of operations.
The ratings reflect the challenge of opening a new gaming project during a time of year when there is the potential for significant disruption from severe weather conditions, S&P said.
The ratings also consider the thin interest reserve cushion that provides little margin for error if the opening of the casino is delayed or if the ramp-up in operations is weaker than anticipated, the agency said.
New gaming projects often are vulnerable to uncertain demand and difficulties managing initial costs, which can lead to poor profitability during the first several months of operations, S&P added.
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