TEXT - S&P may cut Ameristar Casinos Inc

Fri Dec 21, 2012 4:52pm EST

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Overview
     -- U.S. gaming operator Ameristar Casinos Inc. is being acquired by 
Pinnacle Entertainment Inc. for $2.8 billion.
     -- We are placing our 'BB-' corporate credit rating on both Ameristar and 
Pinnacle on CreditWatch with negative implications.
     -- In resolving the CreditWatch listing, we will monitor the companies' 
ability to address various closing conditions and receive the required 
regulatory approvals, and we will meet with management to discuss integration 
plans, near- and longer-term growth objectives, and financial policy.
 
Rating Action
On Dec. 21, 2012, Standard & Poor's Ratings Services placed its ratings, 
including the 'BB-' corporate credit rating, on both Ameristar Casinos Inc. 
and Pinnacle Entertainment Inc. on CreditWatch with negative implications.

Rationale
The CreditWatch listings follow Pinnacle's announcement that it plans to 
acquire Ameristar. Based on the announced terms, the transaction values 
Ameristar at $2.8 billion and will add roughly $1 billion in additional debt. 
This translates into an additional 1.5x of leverage based on Pinnacle and 
Ameristar's combined EBITDA for the 12 months ended Sept. 30, 2012, and 
excluding synergies that Pinnacle expects to be able to achieve. Based on our 
current performance expectations and capital spending assumptions for both 
companies over the next few years, we expect this transaction would result in 
consolidated leverage increasing to the mid- to high-6x area as the combined 
company completes several new developments. While we would expect the company 
to deleverage quickly following the opening of these new properties, leverage 
sustained in the mid- to high-6x area over the near term is somewhat weak for 
the companies' current ratings, in our view. 

In addition to the increase in leverage, an acquisition of this size creates 
some degree of integration risk. We believe these risks are partially 
mitigated by the fact that the acquisition will improve the overall business 
risk profile of Pinnacle by substantially growing its asset base and adding 
additional high-quality assets to its portfolio, expand its geographic 
diversity, and strengthen margins, given Ameristar's EBITDA margins compare 
favorably with other U.S. commercial gaming operators.

CreditWatch
In resolving the CreditWatch listing, we will monitor the companies' ability 
to address various closing conditions and receive required regulatory 
approvals; update our performance expectations for the combined company; and 
meet with management to discuss integration plans and potential synergies, 
near- and longer-term growth objectives, and financial policy. If a downgrade 
for the combined entity is the outcome of our analysis, it would be limited to 
one notch.

Related Criteria And Research
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
     -- Use Of CreditWatch And Outlooks, Sept. 14, 2009
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
 
Ratings List

CreditWatch Placement
                                        To                 From
Ameristar Casinos Inc.
 Corporate Credit Rating                BB-/Watch Neg/--   BB-/Stable/--
 Senior Secured                         BB+/Watch Neg      BB+
   Recovery Rating                      1                  1
 Senior Unsecured                       B+/Watch Neg       B+
   Recovery Rating                      5                  5
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