Moody's downgrades Snoqualmie

Moody's Investors Service said it downgraded Snoqualmie Entertainment Authority's corporate family rating to Caa1 from B3, its probability of default rating to B3-PD from B2-PD and its $130 million floating-rate senior notes due February 2014 and $170 million 9 1/8% senior notes due February 2015 to Caa1 (LGD4, 61%) from B3 (LGD4, 60%). The outlook was changed to negative from stable.

The agency said the downgrade and negative outlook reflect the nearness of the floating-rate notes' maturity. In Moody's view, the authority does not have enough funds to pay the notes in full. Although recent operating trends and current market data suggest that a refinancing is a viable option, the agency said, the ratings capture the heightened level of risk as the maturity date approaches.

Snoqualmie's Caa1 corporate family rating also captures the authority's small size and single asset profile, its intensely competitive market and the volatility of its earnings due to inclement weather, as well as other credit risks that are common to Native American gaming issuers such as the enforceability of lenders' claims in bankruptcy or liquidation, the agency said.

Moody's gives positive rating consideration to Snoqualmie Casino's favorable location, its competitive advantage as the newest casino in the region, strong demographics in its primary Seattle market, good operating performance in recent periods and material discretionary debt reduction in 2012.

Incorporating Moody's adjustments and tribal distribution, the leverage ratio is 6 times.

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