S&P downgrades Lago Resort

S&P said it lowered the corporate credit rating on Lago Resort & Casino to CCC from CCC+ and removed the rating from CreditWatch, where they were placed negative implications on Sept. 5.

At the same time, the agency lowered the issue-level ratings on the company's $15 million revolving credit facility and $225 million first-lien term loan one notch to B-, in line with the downgrade of the company, and removed them from CreditWatch.

The recovery rating remains 1, reflecting an expectation for very high recovery (90%-100%) for lenders in the event of a payment default. S&P said the revolver has priority over the term loan, so the rounded recovery estimate remains 95%, while the rounded estimate on the first-lien term loan is 90%.

The agency also revised the recovery rating on Lago's $85 million second-lien term loan to 6 from 5, and lowered the issue-level rating to CC from CCC and removed the rating from CreditWatch. The 6 recovery rating reflects an expectation for negligible recovery (0%-10%; rounded estimate: 0%).

S&P said the revised recovery rating on the second-lien term loan reflects a lower assumed valuation of the company given weak operating performance since opening.

“The downgrade reflects our view that Lago's meaningful underperformance and a very slow ramp-up in operations since the opening of the casino in February 2017 heightens the risk of some form of debt restructuring over the next 12 months,” the agency said in a news release.

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