Moody's cuts Waterford Gaming

Moody's Investors Service said it lowered the corporate family ratings of Waterford Gaming LLC and its wholly owned subsidiary and co-issuer, Waterford Gaming Finance Corp., to Caa2 from Caa1. It also downgraded their probability-of-default ratings to Caa1 from B3 and senior unsecured notes rating to Caa2 (LGD4, 65%) from Caa1.

This concludes the review for possible downgrade begun on Feb. 3, and the outlook is negative.

The rating actions follow the downgrade of Mohegan Tribal Gaming Authority's corporate family rating to B3. The agency explained that to service its debt, Waterford fully relies on the upstream cash distributions made by Trading Cove Associates, its 50%-owned general partnership, which earns a 5% relinquishment fee based on certain gross revenues of the authority's Mohegan Sun Casino.

Beyond the Mohegan Sun Casino's weakening revenue generation, the downgrade of Waterford's ratings further considers the Mohegan Tribal Gaming Authority's high financial leverage and weak liquidity profile, Moody's said. The authority has the ability to block all or part of the relinquishment payments to Trading Cove Associates in the event of a payment or non-payment default on the authority's senior secured or senior unsecured debt.

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