TEXT-S&P: Gaylord Entertainment ratings unaffected by announcement
May 1 - Standard & Poor's Ratings Services said today that its 'B+' corporate credit rating and stable rating outlook on Nashville-based Gaylord Entertainment Co. is not currently affected by the company's announcement that it is exploring ways to unlock shareholder value. The company did not describe the nature of the potential transaction. Our current base-case expectation is that Gaylord's leverage will improve to the low-5x area and EBITDA coverage of interest expense will improve to around 3x in 2012, credit measures that are good for the current rating. By comparison, our credit measure thresholds for Gaylord at the current rating are leverage under 6x and coverage of interest expense above the 2x area. Gaylord's announcement today also included preliminary first-quarter 2012 results, and the company expects that total RevPAR grew 4.9% and consolidated cash flow grew 24% during the quarter. This operating performance would represent a higher growth pace than our current full-year forecast for Gaylord, and as a result, the company may build in additional cushion in its credit metrics (compared with our thresholds) in 2012 than under our current base-case operating expectation. Consequently, Gaylord may have some capacity for a moderate level of additional leverage over the next couple of years, but we would need to assess the impact of any potential transaction in light of the company's proposed Aurora, Colo. hotel development plans. Additionally, the bulk of the company's proposed Aurora development spending is expected in 2014 and 2015 (Gaylord expects the resort to open in early 2016). We believe the terms of any potential transaction currently under exploration would likely be finalized after the vote to approve the incentives under the State of Colorado's Regional Tourism Act, currently scheduled on May 18, 2012. We will continue to monitor developments regarding a potential transaction and its credit impact on Gaylord.
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