S&P rates Great Wolf loan BB-

Standard & Poor's said it placed the B corporate credit rating on Great Wolf Resorts Inc. on CreditWatch with positive implications.

The agency said it expects to raise the corporate credit rating one notch to B+ from B upon the close of the proposed transactions.

S&P said it expects the outlook will be stable, reflecting an expectation that Great Wolf can sustain credit measures within the thresholds for a B+ rating over the intermediate term.

The agency also assigned a BB- rating to the company's proposed $100 million senior secured revolver due 2018 and proposed $320 million senior secured term loan due 2020 with a recovery rating of 2.

The 2 recovery rating indicates 70% to 90% expected default recovery.

The proceeds will be used to repay about $230 million in outstanding first mortgage notes, $48 million outstanding under the Concord mortgage loan and debt breakage costs, fees and expenses.

The positive watch reflects an expectation that EBITDA coverage of interest expense, pro forma for the proposed refinancing, is likely to improve to the 3x area in 2013, S&P said.

The agency also said it anticipates good operating performance over the next two years, resulting in total debt-to-EBITDA improving to the low-5x area by 2014.

Nonetheless, this level of leverage is aligned with a highly leveraged financial risk profile, according to the agency's criteria.

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