S&P puts Galaxy on negative watch

Standard & Poor's said it placed its B+ long-term corporate credit rating on Hong Kong-based Galaxy Casino SA on CreditWatch with negative implications following an announcement that its parent company, Galaxy Entertainment Group Ltd., plans to place $240 million of zero-coupon convertible notes due 2011 with Merrill Lynch Far East Ltd, J.P. Morgan Securities Ltd. and four international investment funds.

S&P also placed on CreditWatch with negative implications the B+ issue rating on the $600 million of senior unsecured notes and issued by Galaxy Entertainment Finance Co. Ltd., a subsidiary of Galaxy. The unsecured notes are guaranteed by Galaxy and several subsidiaries.

The proposed issue would not add to the company's interest payment burden and it would give the group some financial flexibility over the near term, the agency said. The CreditWatch placement, however, reflects the heightened level of debt leverage. The group plans to use $200 million to expand and upscale its Cotai Mega Resort projects to maintain its competitiveness in a fast-changing market, S&P said.

The ratings could be lowered if S&P believes there has been a substantial increase in execution risk or a reduction in the company's debt-repayment ability. A downgrade would likely to be limited to one notch, the agency said.

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