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Credit Channels Unlocking for Gaming Operators

Analysts say a combination of liens against casino assets and the beginning of looser credit markets have helped generate new cash sources for tapped gaming companies.

Cherry Red Casino! Casino gambling operators, having lived through more than a year of plummeting earnings and bankruptcy dangers enhanced by liquidity difficulties, are breathing a little easier as signs of a thaw in the credit freeze have appeared. While not on the same generous terms as previously, gaming companies are finding it possible to rearrange debt and acquire new loans to retire debts approaching maturity.

Both Harrah's Entertainment and Ameristar Casinos have purchased existing debt with cash raised from private offerings of new senior notes, giving Ameristar another $650 million and Harrah's $1 billion to ease cash woes. Success in issuing the notes tells gaming analysts that investors are willing to bet on the casino operators' survival.

"For Harrah's to be able to issue means there's appetite for the riskiest names in the gaming sector," Chris Snow, a gambling analyst at CreditSights, told the Wall Street Journal.

Snow said that securing the bonds with casinos as collateral, and accepting higher yields on the investments, helped the casino companies bring new investors forward.

MGM Mirage used liens against the Bellagio Casino and the Mirage Casino, two of its prized Las Vegas Strip properties, to guarantee repayment on a recent $1.5 billion bond issue.

Analysts say the rise in value of Ameristar stock and its regional facing operation yield a higher credit rating, preventing the company from putting up casinos to back its notes. But general loosening of the credit market is perceived, as well.

"It's an easier time to get a secured deal done, certainly for the more distressed operators," said Michael Paladino, senior director of gaming at Fitch Ratings.

Published on May 28, 2009 by K.C.Carmichael

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