S&P Upgrades Boyd Gaming (BYD) to 'B+'; Outlook is Stable

August 5, 2016 2:35 PM EDT

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  • U.S. casino operator Boyd Gaming Corp. has completed the sale of its 50% ownership interest in Marina District Development Co., the parent company of Borgata in Atlantic City, to MGM Resorts International and received $589 million in net proceeds which it will use to repay debt and for general corporate purposes. As a result of expected debt repayment, we forecast leverage in 2016 to improve below our 6x upgrade threshold for Boyd.
  • We are raising all ratings, including our corporate credit rating, by one notch and removing them from CreditWatch.
  • The company is also seeking to raise $1.6 billion in new financing that it will use in part to refinance debt at its subsidiary, Peninsula Gaming, and a portion of Boyd's existing senior secured credit facility and 9% senior notes.
  • We are assigning the proposed credit facility a 'BB' issue-level rating and a '1' recovery rating.
  • The stable outlook reflects our expectation for lease-adjusted leverage to improve to around 5x by 2017, pro forma for the completion of the recently announced acquisitions and modest growth in operations through 2017.

S&P Global Ratings today said it raised its corporate credit rating on Boyd Gaming Corp. (NYSE: BYD) to 'B+' from 'B' and removed it from CreditWatch, where we had placed it with positive implications on June 1, 2016. The rating outlook is stable.

At the same time, we raised all issue-level ratings by one notch in line with the upgrade of the company, and also removed them from CreditWatch.

Additionally, we assigned Boyd's proposed $1.6 billion senior secured credit facility (consisting of a $700 million revolver and $200 million term loan A, both maturing in 2021, and a $700 million term loan B-2 maturing in 2023) an issue-level rating of 'BB' and a recovery rating of '1', indicating our expectation for very high (90% to 100%) recovery for lenders in the event of a payment default.

Boyd plans to use the proceeds from the proposed debt issuance, along with excess cash on hand and proceeds from the sale of its ownership interest in Borgata, to refinance Peninsula Gaming's existing debt and consolidate it into the Boyd restricted group, refinance Boyd's existing revolver and term loan A facility and its 9% senior notes due 2020, prefund its acquisitions of Aliante and Cannery Casino's Las Vegas assets, and pay transaction fees, expenses, and debt breakage costs. We plan to withdraw our issue-level and recovery ratings on Peninsula Gaming's debt, Boyd's revolver and term loan A, and Boyd's 9% senior notes when they are repaid.

"The upgrade reflects the improvement in Boyd's credit measures following the completion of the sale of Boyd's ownership interest in Borgata and subsequent use of proceeds to repay debt," said S&P Global Ratings credit analyst Stephen Pagano.

Incorporating the repayment of $589 million in debt from the sale proceeds, the recently announced acquisitions of Aliante and Cannery's Las Vegas assets, and the proposed refinancing transaction, we expect adjusted leverage to improve to the mid- to high-5x area (inside of the 6x upgrade threshold we had set for Boyd) and EBITDA coverage of interest to improve to the mid- to high-2x area in 2016. For 2017, incorporating a full year of cash flow from the planned acquisitions, we anticipate leverage to improve to around 5x and EBITDA coverage of interest to the mid-3x area. The expected improvement in credit measures to within the previous upgrade thresholds that we had set for Boyd supports our positive comparable ratings analysis modifier, and a one notch higher rating.

The stable outlook reflects our expectation for lease-adjusted leverage to improve to around 5x by 2017, pro forma for the completion of recently announced acquisitions and modest growth in operations through 2017.



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