Boyd gets rating boost despite slow Las Vegas market

Moody's Investors Service today boosted a debt rating for Boyd Gaming Corp. of Las Vegas.

The rating on Boyd's $500 million in senior unsecured notes was raised to B3 from Caa1.

The upgrade was based on a technical factor: Recovery prospects for the notes have improved relative to Boyd’s secured debt given a reduced amount of secured debt allowed in Boyd’s capital structure.

The amount allowed changed because of a December loan amendment.

While the nature of the ratings change was technical, it gave Moody’s a chance to comment on Boyd’s prospects as it reiterated other ratings.

Moody’s today affirmed Boyd’s B2 Corporate Family and Probability of Default ratings, its Caa1 senior subordinated note rating and its stable rating outlook.

Moody’s said Boyd's B2 Corporate Family Rating reflects its "high leverage" and its "continued significant exposure to the Las Vegas locals market."

Boyd’s Las Vegas locals casinos are Sam’s Town, the Orleans, the Gold Coast and the Suncoast. Moody’s said they account for about 37 percent of Boyd’s EBITDA — a profitability measure meaning earnings before interest, taxes, depreciation and amortization.

"The Las Vegas locals market was one of the hardest hit by the recent recession, and in our view, likely to be one of the last to fully recover. The ratings also incorporate our view that consumer gaming demand throughout the U.S., already weakened by several years of decline, will remain challenged," Moody’s said.

Positive rating rating factors, Moody’s said, are Boyd's size, scale and diversification, "which should help it manage through the current market and economic challenges better than smaller, less diversified gaming companies."

Boyd, which is carrying some $2.8 billion in long-term debt, lost $3 million, or 3 cents per share, in the second quarter compared with a profit of $3.4 million, or 4 cents per share, for the same period a year ago.

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