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Rating Action:

MOODY'S CONFIRMS MAJESTIC STAR LONG-TERM DEBT RATINGS, PLACES BANK LOAN ON REVIEW FOR POSSIBLE UPGRADE, ASSIGNS B3 TO PROPOSED $200 MIL. SR. UNSEC. NOTES; STABLE OUTLOOK

09 Dec 2005
MOODY'S CONFIRMS MAJESTIC STAR LONG-TERM DEBT RATINGS, PLACES BANK LOAN ON REVIEW FOR POSSIBLE UPGRADE, ASSIGNS B3 TO PROPOSED $200 MIL. SR. UNSEC. NOTES; STABLE OUTLOOK

Approximately $625 Million in Rated Debt Affected.

New York, December 09, 2005 -- Moody's Investors Service confirmed Majestic Star Casino, L.L.C. and its co-issuer Majestic Star Casino Capital Corporation's ("Majestic Opco") B2 corporate family rating and B2 rating on its outstanding $260 million 9 ½% senior secured notes due 2010. Moody's also assigned a B2 rating to Majestic Opco's proposed $30 million add-on to its existing 9 ½% senior secured notes, a B3 rating to its proposed $200 million 10% senior guaranteed unsecured notes due 2011, and placed its $80 million senior secured bank loan on review for possible upgrade. The ratings outlook is stable.

At the same time, Moody's assigned a Caa2 rating to Majestic Holdco L.L.C. and its co-issuer Majestic Star Holdco, Inc.'s ("Majestic Holdco") $55 million 12% senior discount notes due 2011. Majestic Holdco is a newly created entity that will own 100% of Majestic Opco. The Caa2 rating on Majestic Holdco's discount notes acknowledge that the notes will be unsecured, will not be guaranteed by Majestic Opco, and structurally subordinated to all of Majestic Opco's debt. A B2 corporate family rating and stable ratings outlook were also assigned to Majestic Holdco. Once the transaction closes, Majestic Opco's B2 corporate family rating and ratings outlook will be withdrawn so that the corporate family rating and ratings outlook will be located at Majestic Holdco, the highest level legal entity with rated debt. However, Moody's ratings and analysis will continue to reflect the credit profile and financing structure of Majestic Opco.

Proceeds from the new notes issued by Majestic Opco and Majestic Holdco will be used primarily to fund the acquisition of Trump Entertainment Resorts Holdings, L.P.'s ("Trump") Gary, Indiana riverboat casino for $253 million in cash, or about 8 times the casino property's latest twelve month EBITDA. The acquisition is expected to close by the end of 2005 and is subject to customary approvals and consents.

The ratings confirmation of Majestic Opco's existing corporate family and senior secured notes considers that, despite an increase in leverage resulting from the planned debt-financed acquisition, Majestic Opco's competitive position and growth opportunity in the Chicagoland gaming market will improve, and the company will be able to take advantage of significant operating synergies given that Majestic Opco's Indiana riverboat is adjacent to Trump Indiana. Also, Majestic Opco and Trump through a joint venture arrangement, currently own, develop and operate all common land-based and waterside operations in support of their riverboat casinos at Buffington Harbor in Gary, Indiana. Once the transaction is complete, Majestic Opco will own the common land and waterside operations in its entirety.

The B1 rating on Majestic's Opco's $80 million senior secured bank loan, which has a prior lien status over the company's senior secured notes and is currently rated one-notch higher than the corporate family rating, was placed on review for possible upgrade on the basis that, once the transaction closes, the secured bank facility will benefit further from the larger asset base and increased amount of debt subordinated to it. An upgrade of the bank facility would place it two-notches higher than the B2 corporate family rating. The B3 rating on Majestic Opco's new senior unsecured notes recognizes that the notes and guaranty will be effectively subordinated to all of Majestic Opco's senior secured notes and senior secured bank debt.

The stable ratings outlook reflects Majestic Opco's slot-oriented, regional market focus but also incorporates the negative earnings impact resulting from increased promotional activity and competitive conditions, particularly in the Tunica, MS gaming market. Going forward, Moody's expects Majestic Opco will continue to generate positive free cash flow and experience some leverage improvement resulting from higher earnings. However, the likely pursuit of further debt-financed expansion and development opportunities could limit ratings improvement in the intermediate term.

The following Majestic Opco ratings were confirmed:

- Corporate family rating -- B2; and

- $260 million 9 ½% senior secured notes due 2010 -- B2.

The following Majestic Opco rating was placed on review for possible upgrade:

- $80 million senior secured first lien bank facility -- B1.

The following Majestic Opco new rating was assigned:

- $30 million 9 ½% senior secured notes due 2010 (add-on) -- B2; and

- $200 million 10% senior unsecured notes due 2011 - B3.

The following Majestic Holdco new rating was assigned:

- Corporate family rating - B2; and

- $55 million 12% senior discount notes due 2011 -- Caa2.

Majestic Star Casino, LLC (Majestic Opco) directly and indirectly owns and operates riverboat casinos in Gary, Indiana, Tunica, Mississippi, and Black Hawk, Colorado. Majestic Star Holdco, Inc. (Majestic Holdco) is a newly created entity that will own 100% of Majestic Opco.

New York
Tom Marshella
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Keith Foley
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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