S&P rates Cannery Casino loans BB-, CCC+

Standard & Poor's said it placed the B- corporate credit rating on Cannery Casino Resorts LLC on CreditWatch with positive implications.

The agency also said it assigned a preliminary BB- rating to Cannery's proposed $390 million first-lien credit facilities with a preliminary recovery rating of 1, indicating 90% to 100% expected recovery in a default.

The proposed facility consists of a $40 million senior secured revolving credit facility due 2017 and a $350 million senior secured term loan due 2018.

S&P also assigned a preliminary CCC+ rating to Cannery's proposed $175 million second-lien senior secured term loan due 2019 with a preliminary recovery rating of 6, indicating 0% to 10% expected recovery in a default.

The proceeds will be used to refinance its existing credit facilities and repay $62.8 million of its preferred stock. In conjunction with the transaction, $38 million of the preferred stock will also be converted to common equity, such that only $24.2 million of the preferreds will be outstanding pro forma for the transaction.

The CreditWatch listing reflects an expectation that S&P will raise the corporate credit rating to B from B- after the transaction closes, the agency said.

The upgrade considers the elimination of near-term covenant and refinancing concerns, as well as the reduction of a large portion of Cannery's preferred stock, S&P said.

Although Cannery has improved its financial profile, the agency said it still views the financial risk profile as highly leveraged given the company's high debt balances and a projection that debt-to-EBITDA will remain above 6.5x through 2013.

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