July 5 - Standard & Poor's Ratings Services assigned its 'B' issue-level
rating to Las Vegas-based Boyd Gaming Corp.'s $350 million 9% senior
unsecured notes due 2020. The '4' recovery rating reflects our expectation for
average (30% to 50%) recovery for lenders in the event of a payment default.
Boyd used the proceeds to repay outstanding borrowings under its revolving
credit facility, which were partly drawn to finance a portion of the purchase
price for its acquisition of Peninsula Gaming LLC.
We affirmed our 'B' issue-level rating on Boyd's $500 million 9.125% senior
notes due 2018 and removed the rating from CreditWatch, where it was placed
with negative implications on May 17, 2012. The recovery rating remains '4'.
The affirmation follows Boyd's permanent reduction in the size of its revolver
by $150 million following the close of its notes issuance. The amount of the
permanent reduction represents the amount of increased revolving commitments
that became effective and were funded May 30, 2012.
Our corporate credit rating on Boyd is 'B'; the rating outlook is stable. Our
'B' corporate credit rating on Boyd reflects our assessment of its financial
risk profile as "highly leveraged" and our assessment of its business risk
profile as "fair," according to our criteria.
We believe Boyd's proposed acquisition of Peninsula will strengthen its
business risk profile, because Peninsula's assets face limited competition,
have high EBITDA margins compared with other commercial gaming operators, and
are relatively good quality assets. Additionally, the transaction improves
Boyd's geographic diversity and further lessens its reliance on the Las Vegas
locals market, which has been more challenged than other markets in recent
years. However, based on the terms of the transaction and incorporating our
expectations for Boyd's and Peninsula's operating performance, we expect the
consolidated Boyd and Peninsula entity will remain highly leveraged at more
than 7.5x over the intermediate term. We view this level of leverage as
aligned with a 'B' corporate credit rating, notwithstanding the improvement to
Boyd's business risk profile.
In 2012, we expect Boyd's consolidated EBITDA (excluding the Peninsula assets)
to grow by about 15%, incorporating the addition of recently acquired Biloxi,
Miss.-based casino IP to its portfolio, modest growth at its Las Vegas locals
and Midwest and South segments, and low- to mid-single-digit growth for
Downtown Las Vegas. In 2012, we expect Peninsula will experience substantial
revenue and EBITDA growth, approximately 50% and 75%, respectively, benefiting
from the recent opening of its Kansas Star property. We continue to expect
Boyd will maintain modest covenant cushion over the next few quarters;
although, we expect covenant cushion will be thin as both the senior secured
and total leverage covenants tighten further in the fourth quarter of 2012 and
in 2013. However, we believe Boyd would be successful in securing an
amendment, if necessary, or in executing additional capital markets
transactions that would alleviate covenant pressure.
RELATED CRITERIA AND RESEARCH
-- Methodology And Assumptions: 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
-- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Boyd Gaming Corp.
Corporate credit rating B/Stable/--
$350 mil. 9% sr unsec notes due 2020 B
Recovery rating 4
Rating Affirmed, Removed From CreditWatch
$500 mil. 9.125% sr notes due 2018 B B/WatchNeg
Recovery rating 4 4
Complete ratings information is available to subscribers of RatingsDirect on
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