S&P Places Gaming and Leisure Properties (GLPI) on CreditWatch Negative Amid Pinnacle (PNK) Asset Deal

Standard & Poor's Ratings Services today said it kept its ratings on Gaming and Leisure Properties (Nasdaq: GLPI), including its 'BB+' corporate credit rating, on CreditWatch, where we placed them with negative implications on March 10, 2015.

"The CreditWatch update follows GLPI's announcement today that it has entered into an agreement to acquire Pinnacle Entertainment Inc.'s real estate assets for about $5 billion (including transaction fees and expenses)," said Standard & Poor's credit analyst Ariel Silverberg.

GLPI plans to fund the acquisition with about $2 billion in new debt, $1.1 billion in new equity, and through offering Pinnacle shareholders 56 million GLPI shares. GLPI acquisition financing plans include a sufficient amount of equity consideration, including additional shares being offered to Pinnacle shareholders and additional common stock issuances, such that leverage will not be above 5.5x following the close of the transaction. The continued CreditWatch listing reflects uncertainty surrounding the timing, level, and type of an equity raise, and whether GLPI will be able to complete its planned equity raise on terms it finds acceptable. If GLPI is successful at raising the planned level of equity and leverage does not exceed the company's publicly stated financial policy goal of 5.5x, which is the threshold at which we would consider lowering GLPI's rating, we expect to affirm all ratings. We have not incorporated an acquisition of the Meadows Racetrack and Casino, which is currently under litigation. We believe a resolution, if any, may not occur over the near term. However, in the event that GLPI closes the Meadows acquisition, we believe it would finance the purchase with a mix of debt and equity such that leverage remains in line with its financial policy of 5.5x.

In resolving the CreditWatch listing, we will monitor the company's progress in completing its planned equity raise to partially fund the transaction. In the event the company is successful in raising the planned level of common stock and leverage does not rise above 5.5x pro forma for the transactions, we expect to affirm the ratings.

In the event that GLPI is unsuccessful or experiences delays in raising the level of common stock that it expects to use to partly fund the acquisition, or if we believe the equity raise would be unsuccessful, we could lower ratings.

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