Debt rating agency: Outlook stable for Station Casinos
24 October 2011
A second Wall Street debt rating agency says the outlook for Station Casinos LLC of Las Vegas is stable now that it’s operating out of bankruptcy.
Moody's Investors Service assigned a "B3’’ Corporate Family Rating to Station on Monday as it rated about $2 billion of the company’s debt.
The B3 rating is squarely in speculative territory, which isn’t unusual for the gaming industry.
Standard & Poor’s, which rated Station’s debt in August, also gave it a speculative grade "B’’ corporate credit rating with a stable outlook.
Moody’s, in today’s report, said its B3 rating for Station reflects some pluses and minuses.
On the plus side, the company how has low cost debt, no debt maturities until 2016 and no risky developments under construction.
On the down side, the company remains highly leveraged and, with 17 gaming properties in Southern Nevada, it’s operating in a locals casino market that has been hit particularly hard by foreclosures and high unemployment (13.6 percent).
"Las Vegas still struggles with one of the country's highest levels of unemployment and one of the steepest drops in housing prices. We believe this economic climate will cause the Las Vegas locals market recovery to lag other U.S. gaming markets. Nevertheless, Moody's expects gaming demand in the Las Vegas locals market will rise over the next year and as it does EBITDA is expected to increase modestly,’’ Moody’s said in today’s report.
EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.
Station, through the bankruptcy process ending earlier this year, shed about $4.5 billion of debt.
The company has not yet reported third quarter earnings, but during the second quarter it said net revenue increased 8.5 percent to $299 million thanks to its aggressive ``We Love Locals’’ advertising campaign.
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