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Rating Action:

MOODY'S ASSIGNS RATINGS TO SHELF REGISTRATION OF CIRCUS CIRCUS ENTERPRISES, INC. AND ITS SUBSIDIARIES CIRCUS FINANCE I AND CIRCUS FINANCE II

24 Sep 1998
MOODY'S ASSIGNS RATINGS TO SHELF REGISTRATION OF CIRCUS CIRCUS ENTERPRISES, INC. AND ITS SUBSIDIARIES CIRCUS FINANCE I AND CIRCUS FINANCE II New York, 09-24-98 -- Moody's Investors Service assigned prospective ratings of (P)Baa3 senior unsecured and (P)Ba2 subordinated to the shelf registration of Circus Circus Enterprises, Inc. and (P)"ba2" preferred stock to the shelf registration of its subsidiaries, Circus Finance I and Circus Finance II, and confirmed the company's existing ratings. The company's ratings reflect its diversified portfolio of gaming properties located in several jurisdictions and its strong cash flow. The ratings also incorporate competitive pressures in Las Vegas due to a supply/demand imbalance and the company's high level of debt incurred to finance the development of Mandalay Bay, a new destination resort in Las Vegas, and several expansion and refurbishment projects at existing properties.
Ratings assigned are:
Circus Circus Enterprises, Inc.
(P)Baa3 to senior unsecured shelf registration.
(P)Ba2 to senior subordinated shelf registration.
(P)Ba2 to subordinated shelf registration.
Circus Financing I
(P)"ba2" to trust preferred securities.
Circus Financing II
(P)"ba2" to trust preferred securities.
Ratings confirmed are:
Circus Circus Enterprises, Inc.
Senior unsecured rating at Baa3.
Unsecured senior bank loan agreement at Baa3.
Commercial paper program at Prime-3.
Senior subordinated and subordinated ratings at Ba2.
Circus Circus is one of the most diversified gaming companies, with ten fully owned casino hotels located throughout Nevada and one riverboat casino in the Tunica market. The company also holds interests in several joint ventures: a Chicago casino riverboat, two casino-hotels located in Nevada, and a partnership in Detroit that expects to open a temporary facility during 1999. Mandalay Bay, a destination resort on the Las Vegas Strip with a tropical theme, is scheduled to open in March 1999.
The company has a strong presence in Las Vegas, an intensely competitive market due to a supply/demand imbalance. The company responded to the competitive challenges with marketing and cost savings initiatives and has stemmed cash flow declines at Circus Circus Las Vegas and Excalibur and improved the operating results at Luxor. During the past few months, Luxor's REVPAR has risen, counter to trends among other Strip properties, as the property has benefited from the completion of an extensive expansion and refurbishment project and the initiation of a national image advertising campaign.
Mandalay Bay will be the second of five new "must-see" resorts scheduled to open on the Strip during the next two years. The 3,700 room casino hotel will feature a variety of restaurants, entertainment, and retail attractions designed to appeal to both out-of-town visitors and local residents. The hotel will incorporate a 400 room "hotel within a hotel" with a separate entrance managed by Four Seasons Hotels (sr. at Ba1, under review for possible upgrade) and will also have 100 House of Blues themed-rooms. The property's infrastructure will include convention facilities, a 12,000 seat arena, and a monorail system to transport visitors from the corner of the Strip and Tropicana Avenue to the company's three adjacent properties, each of which appeals to a different customer segment.
As a result of debt incurred to fund its aggressive capital expenditures program and share repurchases, Circus Circus's balance sheet is highly leveraged. In the past, the company has quickly repaid debt with cash flow from its completed projects. Moody's cautions that, if short-term returns on the company's Las Vegas properties are negatively impacted by the serious supply bulge in Las Vegas, the pace of its debt repayment may be slower than in the past. Therefore, the company's rating outlook is negative. The company's ratings could face downward pressure if difficult operating conditions in Las Vegas limit its ability to repay debt and strengthen its debt protection measurements following the opening of Mandalay Bay.
Circus Circus Enterprises is establishing Circus Finance I and Circus Finance II, two statutory business trusts, as vehicles to issue trust preferred securities. The proceeds from any trust preferred securities that are issued will be upstreamed to Circus Circus Enterprises in exchange for subordinated debentures that will rank pari passu with the company's other subordinated debt obligations. The trust will use interest and principal payments received from the subordinated debentures to fund distributions and redemptions of the preferred securities. Circus Circus Enterprises's guarantee of the trust preferred securities will be junior in right of payment to its existing liabilities. Circus Circus Enterprises, headquartered in Las Vegas, Nevada, owns and operates 11 gaming properties in Nevada and one riverboat casino in Mississippi. The company is developing a new casino-resort in Las Vegas that is scheduled to open during the spring of 1999. Circus Circus also owns equity interests in two gaming properties in Nevada, a riverboat casino in Chicago, and a partnership that is developing a casino in Detroit. During 1997, the company's revenues were $1.4 billion.

No Related Data.
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