Moody's downgrades Progressive Gaming

Moody's Investors Service said it downgraded Progressive Gaming International Corp.'s corporate family and senior secured bond ratings to Caa1 from B3. This concludes a review begun on March 28. The outlook is negative.

The agency said the downgrade reflects a decline in the company's earnings and negative cash flow from operations, a decline in the installed base of both table games and slot machines, significant reliance on new product introductions to jump-start revenue and earnings growth in 2006 and beyond and limited liquidity given the termination of the company's revolving credit facilities.

To a lesser degree, the ratings reflect concerns over the increasing complexity of the company's more technology-driven revenue and exchange transactions evidenced by the amended filing of its Sept. 30, 2005 10-Q report to reclassify a nonrecurring licensing transaction from revenues into a gain on sale category and the disclosure of a material weakness in internal controls in its 10-K related to significant non-routine complex transactions.

In addition, Moody's said the downgrade takes into account the uncertainty surrounding the time it may take for new product introductions to result in higher revenue and the likelihood the company's internally generated cash flow will not be sufficient to fund all capital, intellectual property and game title investment spending and interest needs in 2006.

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