S&P downgrades Sazka

Standard & Poor's said it lowered Czech Republic-based Sazka AS's long-term corporate credit rating to B+ from BB-, lowered Sazka's €175 million senior secured bonds to B+ from BB- and placed the ratings on CreditWatch with negative implications.

S&P said the downgrade and the CreditWatch placement reflect Sazka's failure to register two out of the three expected first-ranking mortgages with the Czech Cadastral Registry in Prague and the agency's concerns about how the company will resolve this. Sazka's failure to register all the mortgages, and to give evidence of their registration to the trustees prior to April 30, would enable bondholders to request the early redemption of the bonds, and S&P said the company would not be able to redeem the bonds with its current funds.

The ratings reflect the group's aggressive financial leverage, with gross debt to EBITDA of more than 4.5x, following its funding of the construction of Sazka Arena, an 18,000-seat sports and entertainment complex in Prague, the agency said. The arena had been expected to break even in 2005, but that has now been pushed back to 2007.

S&P said the ratings are supported by the sustainable, cash-generative nature of Sazka's well-established domestic gaming business and its 80% market share.

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