S&P rates Sugarhouse notes B-

Standard & Poor's said it assigned Sugarhouse HSP Gaming Prop. Mezz. LP's $235 million of senior secured notes due 2016 a B- rating, which is the same as its B- corporate credit rating.

The agency also said it assigned to the debt a recovery rating of 3, indicating 50% to 70% expected recovery in a default.

Sugarhouse HSP Gaming Finance Corp., a newly formed wholly owned subsidiary, serves as co-issuer of the notes.

The proceeds will be used to repay the $206 million outstanding balance on its previously existing term loan, as well as the $20 million balance on its furniture, fixture and equipment facility, S&P said.

The agency also said it has withdrawn the existing B- ratings on the company's senior secured credit facilities. The company has entered into a new senior secured credit facility, which is unrated, providing for a $10 million revolving line of credit.

The company's B- corporate credit rating is unchanged.

The outlook is negative.

The ratings reflect the company's reliance on a single property for cash flow generation, the highly competitive dynamics in the region and a belief that the company will likely pursue a future debt-financed expansion at the casino, despite the limited operating history at the property and weaker-than-expected slot performance, S&P said.

Additionally, a meaningful portion of the company's capital structure is comprised of preferred and senior preferred equity interests, which accrue a substantial noncash rate of return, the agency said.

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