Fitch Places Borgata's IDR on Positive Watch Following Acquisition Announcement

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has placed Marina District Finance Company, Inc.'s (Borgata) 'B' Issuer- Default Rating (IDR) on Rating Watch Positive and Borgata's issue ratings on Rating Watch Positive following MGM Resort International's (MGM) and Boyd Gaming's (BYD) announcement that MGM will acquire BYD's 50% stake in Borgata. MGM will then sell Borgata's real estate assets to MGM Growth Properties (MGP) and lease back the real property to a subsidiary of MGM.

The Rating Watch reflects Fitch's view of MGM & MGP's credit profiles, which are seen by Fitch as stronger than Borgata's current credit profile. Fitch currently rates MGM's Long-Term IDR 'BB'. Fitch does not have public ratings on MGP but views its credit profile as slightly stronger relative to MGM's main credit group.

Fitch will more closely link Borgata's IDR to the MGM corporate family following the acquisition. At that point Borgata will be included in the master lease between MGM and MGP and most likely will be integrated into MGM's loyalty program.

Borgata is a market leader in a tough Atlantic City market. Leverage is currently low at 3.1x for the LTM period ending March 31, 2016, reflecting debt paydown and growing EBITDA.

Borgata is exposed to potential regulatory risk as New Jersey residents are voting on whether to expand gaming outside of Atlantic City in November. Overall, Fitch believes that Borgata could remain a leading casino resort in the Northeast even if gaming expands in the state.

KEY ASSUMPTIONS

Fitch's expectations are based on the agency's internally produced, conservative rating case forecasts. They do not represent the forecasts of rated issuers individually or in aggregate. Key Fitch forecast assumptions include:

--Fitch projects low single-digit growth in 2016 and mid-single-digit declines in 2017 as competitive properties open in New York and Pennsylvania.

--EBITDA margins are relatively stable between 24% - 26% through the forecast period.

--Fitch does not model in a gaming expansion in New Jersey.

BORGATA RATING SENSITIVITIES

Should the transaction close as planned, Fitch will likely upgrade Borgata's IDR as Fitch will view it more closely linked with that of MGM. It is possible that Fitch will withdraw Borgata's ratings if its credit facility is repaid. Borgata had roughly $640 million of secured term loans outstanding as of March 31, 2016.

FULL LIST OF RATING ACTIONS

Marina District Finance Company, Inc.

--Long-Term IDR 'B' placed on Rating Watch Positive;

--Senior secured revolver 'BB/RR1' placed on Rating Watch Positive;

--Senior secured term loans due 2018 and 2023 'BB-/RR2' placed on Rating Watch Positive.

Date of Relevant Rating Committee: 9, June, 2016

Additional information is available on www.fitchratings.com.

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers (pub. 05 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879564

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005880

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160610005482/en/

Fitch Ratings
Primary Analyst
Alex Bumazhny, CFA, +1-212-908-9179
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Colin Mansfield, CFA, +1-212-908-0899
Associate Director
or
Committee Chairperson
Eric Rosenthal, +1-212-908-0286
Senior Director
or
Media Relations
Alyssa Castelli, New York, +1-212-908-0540
[email protected]

Source: Fitch Ratings

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