TEXT-S&P:Caesars Entertainment rtgs not affected by upsize

Fri Dec 7, 2012 8:53am EST

Dec 07 - Standard & Poor's Ratings Services said today that its corporate credit and issue-level ratings on Caesars Entertainment Corp. are unaffected by the upsizing of its recent notes issue to $750 million from the originally proposed $300 million. We expect the net increase in first lien debt from this transaction to approximate $400 million, as the company intends to use a portion of proceeds from the transaction to repay term loan debt, and over the near term, to continue to convert portions of its revolver into term debt and simultaneously pay down a portion of that term debt, for a total amount of approximately $350 million. Although our first-lien issue-level rating remains one notch higher than our corporate credit rating, the issuance of incremental first-lien notes has pressured recovery prospects for first-lien creditors, which we believe are now at the very low end of the 70% to 90% range for a '2' recovery rating under our criteria. Therefore, following this transaction, the company has no capacity for incremental first lien debt at a '2' recovery rating. Any incremental first-lien debt that is not fully utilized to repay outstanding first-lien debt would likely result in a revision of our first-lien senior secured debt recovery rating to '3' from '2', and a downgrade of our issue-level rating to 'B-' (the same as our corporate credit rating) from 'B', in accordance with our notching criteria.

RELATED CRITERIA AND RESEARCH

-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012

-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011

-- Use Of CreditWatch And Outlooks, Sept. 14, 2009

-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009

-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008