Moody's downgrades Lake at Las Vegas

Moody's Investors Service said it lowered the ratings of Lake at Las Vegas Joint Venture and its co-issuer, LLV-1 LLC, including the corporate family rating and its senior secured bank credit facility to B3 from B2 and the probability-of-default rating to Caa1 from B3. The facility's LGD3 (36%) loss-given-default assessment was unaffected.

The ratings remain on review for further downgrade, where they were placed on Oct. 20.

The agency said the downgrade was triggered by the inability of Lake at Las Vegas to meet its 2x interest coverage covenant for the last 12-month period ended Sept. 30. Because of zero bulk lot sales during the quarter and weak sales earlier in the year, EBITDA was negative during the quarter, driving coverage down for the period to 0.76x. The company received a waiver from its banks on Nov. 7, permitting it to waive compliance until Feb. 7. By that time, Lake at Las Vegas hopes to have lined up an investor that will inject $150 million of cash equity into the company.

Moody's said that this $150 million equity infusion, if successfully arranged, would allow Lake at Las Vegas to cover debt service requirements and other expenditures through 2008 even without any additional bulk sales of lots and may permit the banks to relax the company's financial covenants, making compliance easier going forward.

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