The Borgata, Boyd Gaming stir investor excitement ahead of bank meetings

By Sara Rosenberg

New York, April 29 - The gaming sector is hitting the primary bank loan market in full force next week with both the Borgata and Boyd Gaming Corp. scheduled to hold bank meetings for new credit facilities. These deals have already sparked interest among investors, according to market professionals, and commitments are expected to arrive before the deals are launched.

The Borgata, a $1 billion entertainment resort under construction in Atlantic City, N.J., is expected to hold a bank meeting regarding a new $187.5 million term loan B on May 9, according to a syndicate source. CIBC is the sole lead arranger for the deal.

Approximately 10 institutions were invited to give the loan an early look, according to a fund manager. In fact, the fund manager is currently looking at the deal on a preliminary basis for the purpose of committing before the actual bank meeting is held.

"I went to visit the property in Atlantic City and was favorably impressed," the fund manager said.

Market talk has the term B loan priced with an interest rate of Libor plus 400 basis points and a maturity date of Dec. 13, 2007. The Borgata, according to market sources, is expected to carry a senior secured rating of B2 and a senior implied rating of B2. The syndicate was unavailable to confirm this information.

The credit facility will be used to refinance a $187.5 million bridge component of the company's bank debt, a syndicate source previously told Prospect News. The company's construction loan is expected to remain in place.

The refinancing, according to the syndicate source, is taking advantage of good timing from an investor demand standpoint and from a credit standpoint. "The Borgata project is ahead of schedule and on budget so it's a great property," the syndicate source said.

The Borgata is being developed through a joint venture with Boyd Gaming Corp. and MGM Mirage. According to the syndicate, the bank meeting for Boyd Gaming's $500 million loan and the Borgata's loan will most likely occur concurrently.

"I hope that committing to the Borgata will have a favorable influence on our allocation of Boyd Gaming," the fund manager said. "We're very interested in Boyd and mildly interested in Borgata."

The fund manager explained that the Boyd Gaming offering is expected to blow out, while the Borgata deal is not as attractive because it is a riskier investment.

Boyd Gaming Corp., a Las Vegas, Nev. gaming company, is schedule to hold a bank meeting on May 9 regarding its $500 million credit facility (Ba1/BB), according to a syndicate source. CIBC is sole lead arranger for the deal.

The loan is expected to consist of a $400 million five-year revolver with an interest rate of Libor plus 250 basis points and a $100 million five-year term B with an interest rate of Libor plus 250 basis points. There is a commitment fee of 50 basis points on the revolver.

Proceeds will be used to refinance $200 million of senior notes, which are due in October 2003, according to a Securities and Exchange Commission filing.

Another offering scheduled for mid-May that is expected to be well received is Roundy's Supermarket's second round bank meeting for a $340 million credit facility. Bear Stearns & Co. and CIBC are co-leads for the offering.

A first round bank meeting for existing lenders was held on April 22. According to a syndicate source, the deal received a great reception at the first meeting with all of the banks that were invited to participate showing up. In addition, the offering has received a lot of reverse inquiries from institutions, the syndicate source said.

What separates Roundy's from most other supermarket chains is that the company owns a lot of its stores as opposed to just renting the space, according to the fund manager. Hence Roundy's Supermarket has good collateral to back up its loan, making the offering an attractive one.

In addition to good security, Roundy's, according to the syndicate, knows its niche and has a good management team.

The Pewaukee, Wis. food wholesaler and retailer's new loan consists of a $250 million seven-year term B tranche and a $90 million five-year revolver. The revolver was priced with an interest rate of Libor plus 325 basis points and there is an initial commitment fee of 75 basis points, the syndicate source said. The term loan has not yet been priced because the syndicate is waiting to see how the rating agencies rate the new credit facility. It is anticipated that ratings of BB- or better will be assigned to the new credit facility, according to the syndicate source. Basically all assets will be used to secure the loan.

According to market sources, only $40 million of the revolver will need to be syndicated because Bear Stearns and CIBC are holding on to $25 million each. However, the syndicate source said that they are prepared to hold up to $25 million, but if people are interested in the revolver, they will not be shut out of the deal.

The credit facility is expected to close by the end of May or early June, according to the syndicate source, depending on whether proxy issues related to the leveraged buyout by Willis Stein & Partners work out.

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