S&P rates Kerzner converts B+

Standard & Poor's said it assigned its B+ rating to Kerzner International Hotels Ltd.'s $200 million 2.375% convertible senior subordinated notes due April 2024.

Proceeds, net of transaction expenses from this offering, along with cash on hand and borrowings under the revolving credit facility, will be used to fund future capital expenditures, which include development costs for the Phase III expansion at that Paradise Island resort, the company's equity investment in Atlantis, The Palm, and for general corporate purposes.

At the same time, S&P affirmed its BB corporate credit and other ratings on the company, including the BB bank loan rating and B+ subordinated debt rating.

The outlook is negative.

S&P said the ratings on Kerzner reflect the steady operating performance of its Paradise Island, Bahamas, operations (Atlantis and the Ocean Club), the company's good position as a manager of luxury resort hotels, and the expected reliable cash flow stream from the Mohegan Sun casino in Connecticut.

These factors are offset by a high cash flow concentration at Paradise Island, a historically active growth strategy, and the expectation that credit measures will weaken meaningfully from current levels during the next few years, as cash flow and additional borrowings are used to fund growth plans.

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