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S&P lowers Gateway Casinos, rates loan BB, notes BB+
Standard & Poor's said it lowered the long-term corporate credit rating on Gateway Casinos & Entertainment Ltd. to B+ from BB- following the company's proposed refinancing, which increases debt.
The outlook is stable.
The agency also said it lowered the rating to BB from BB+ on the company's first-lien senior secured debt. The 1 recovery rating on the debt is unchanged.
S&P also said it lowered the rating on Gateway's second-lien debt to B+ from BB. The 3 recovery rating on the second-lien debt is unchanged.
The agency also said it assigned a BB rating and 1 recovery rating to Gateway's proposed first-lien C$145 million term loan A and C$145 million term loan B. The 1 recovery rating indicates 90% to 100% expected default recovery.
S&P also said it assigned a B+ rating and 4 recovery rating to the company's C$220 million second-lien notes. The 4 recovery rating indicates 30% to 50% expected default recovery.
Gateway's highly leveraged financial risk profile is characterized by high debt leverage with commensurately low interest coverage with pro forma fully adjusted debt-to-EBITDA expected to be more than 6x with leverage likely only declining below 6x in 2015, the agency said.
The ratings reflect the company's fair business risk profile, characterized by a strong share of the concentrated gaming market in British Columbia, where steady growth and a supportive regulatory regime have translated into industry-leading margins for the company, S&P said.
Gateway's business risk profile is constrained by its limited diversity with cash flows heavily concentrated in a few key assets in British Columbia, the agency added.
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