Moody’s ups Affinity Gaming PDR, view negative

Moody's Investors Service said it confirmed Affinity Gaming Corp.’s corporate family rating at B1, upgraded the probability of default rating to B1-PD and changed the outlook to negative.

The agency also confirmed the B1 rating on the company's first-lien term loan (including the proposed $35 million add-on) and $75 million revolver, and assigned a B3 rating to the proposed new eight-year second lien term loan.

Proceeds from the add-on first-lien term loan, the new second-lien term loan, cash on hand and sponsor equity will be used to finance the buy-out of the company by affiliates of by Z Capital Partners, LLC. The amendment will be binding and become effective upon completion of the buy-out which is expected to occur in the first quarter of 2017 upon receipt of regulatory approval.

This concludes the review of the company's ratings for downgrade that began on Aug. 24.

Moody’s said the confirmation of the B1 corporate family rating reflects better-than-expected operating performance in the second quarter, which resulted in an upward revision of our forward EBITDA estimates, good EBIT coverage of interest (1.6 times) and the company's ability to generate positive free cash flow.

The agency expects the combination of EBITDA growth and use of free cash flow to prepay debt will cause debt/EBITDA to decline to around 5 times by year-end 2017.

The change in the probability of default rating reflects the introduction of the second-lien debt which lowers the assumed family recovery rate per Moody's Loss Given Default Methodology.

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