Moody's rates Lake at Las Vegas loans Caa1

Moody's Investors Service said it assigned a Caa1 rating (LGD3, 33%) to the proposed new $540 million first-lien senior secured bank credit facility of Lake at Las Vegas Joint Venture and its co-issuer, LLV-1, LLC. The facility includes a $475 million first-lien senior secured term loan and a $65 million first-lien senior secured synthetic revolver.

The agency also affirmed the company's Caa1 corporate family rating, Caa2 probability-of-default rating and the Caa1 (LGD3, 33%) rating for its existing but soon-to-be refinanced $500 million first-lien term loan.

The outlook is negative based on Moody's expectation that bulk lot sales to homebuilders will stay weak through 2008, with pickup likely to be sluggish at first.

The agency said the ratings consider the company's weak financial and operating performance since the last half of 2006 compared with Moody's expectations because of the housing glut in Las Vegas and because the company needs to seek substantial covenant relaxation. The ratings also reflect the geographic and demographic concentration of the Lake Las Vegas project, market risk and the cyclical nature of the homebuilding and land development industries, the agency said.

The ratings also acknowledge the long-term strength of the Las Vegas housing market, the owners' track record for large developments, the substantial infrastructure investment already made in the project, the significant collateral in the structure and the development's unique water rights and 320-acre private lake.

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