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Rating Action:

MOODY'S PLACES THE RATINGS OF FOUR GAMING COMPANIES ON REVIEW FOR POSSIBLE DOWNGRADE; CONFIRMS THE RATINGS OF IGT AND CHANGES THE OUTLOOK TO NEGATIVE.

25 Sep 2001
MOODY'S PLACES THE RATINGS OF FOUR GAMING COMPANIES ON REVIEW FOR POSSIBLE DOWNGRADE; CONFIRMS THE RATINGS OF IGT AND CHANGES THE OUTLOOK TO NEGATIVE.

New York, September 25, 2001 -- Moody's Investors Service placed the ratings of the following companies in the gaming industry on review for possible downgrade reflecting the uncertainty concerning the future level of leisure travel following the attacks on the U.S. that occurred on September 11, 2001. Moody's expects the cash flow of all gaming companies will be negatively impacted to varying degrees as the economy slows further and consumer confidence dips. Therefore, Moody's will review the ratings of the gaming companies outlined below in order to determine the appropriate individual company rating actions.

The review will focus on assessing the level to which travel may drop due to the slowing economy, as well as how leisure travel and spending patterns over the intermediate term may change following the attacks on the U.S. on September 11. Moody's review will also concentrate on the steps individual management teams will pursue to offset the negative impact on cash flow. Moody's will review the extent to which companies can curtail capital expenditures to offset the drop in cash flow. The extent to which companies buyback stock and future financial policy will be an important credit factor in the review process.

We have already seen a return to more normal levels of play in many markets since the attack. However, there is a concern that there may be a further decline in the volume of play as the economy deteriorates further, and that the players' gaming budgets may reduce with falling consumer confidence. These factors will impact both fly-to and drive-to markets. However, Moody's believes that fly-to markets such as Las Vegas will be more adversely impacted than drive-to markets because travelers may be less willing to fly due to safety concerns, or until the possible U.S. response to the terrorist attacks is known. Las Vegas centric operators rely heavily on room revenues that are likely to be adversely affected by a drop in room rates as companies' run promotions to spur fly-in business. Travelers lured by lower room rates may not spend heavily on gaming which is the most profitable business for gaming operators. On the other hand, it is possible that casino customers who would normally fly into a market may be willing to drive instead, and thereby offset some lost fly-in traffic.

Those companies that were already weakly positioned within their current rating category have less cushion to absorb the adverse effects of lower travel levels, and smaller gaming budgets going forward. Moody's expects the ratings of those companies that have a higher percentage of revenues derived from gaming and drive-in customers to be able to absorb the adverse effects of recent events better than versus those that derive more revenue from fly-in customers, rooms and other amenities.

The Gulf War provides some insight into the potential impact on the industry. However we believe the impact of the recent terrorist attacks are likely to be more pronounced and longer lasting given that they occurred on U.S. soil, and the U.S. response is not yet known.

Moody's confirms the ratings of International Game Technology (IGT) and changes the rating outlook to negative reflecting the possibility that gaming operators may cancel or delay orders for new slot machines. Additionally revenues of the gaming operations segment may be adversely affected if the volume of gaming reduces. We note that IGT has significant cash balances that can be used to offset the negative effects of reduced earnings.

Ratings placed on review for possible downgrade:

Harrah's Operating Company, Inc.

Senior unsecured bank credit facility at Baa3.

Shelf registration for senior unsecured debt at (P) Baa3.

Shelf registration for preferred stock at (P) Ba2.

Senior subordinated notes at Ba1.

Commercial paper at Prime-3.

Harrah's Entertainment, Inc.

Shelf registration for senior unsecured debt at (P) Baa3.

Shelf registration for preferred stock at (P)Ba2.

MGM MIRAGE

Guaranteed senior unsecured bank facilities at Baa3.

Guaranteed senior unsecured notes at Baa3.

Guaranteed senior subordinate notes at Ba1.

(P)Baa3, (P) Ba1, (P) Ba3 ratings in relation to the shelf registration for guaranteed senior, senior subordinated and subordinated debt, respectively. (We expect the subordinated rating of (P)Ba3 to be adjusted in accordance with Moody's new notching policy that was recently announced.)

Senior implied rating at Baa3.

Issuer Rating at Ba1.

Mirage Resorts, Incorporated

Guaranteed senior unsecured notes at Baa3.

Park Place Entertainment

Senior unsecured debt at Baa3.

Senior subordinate debt at Ba1

(P)Baa3, (P)Ba1, (P)Ba2 ratings in relation to the shelf registration for senior, subordinated debt and preferred stock, respectively.

Commercial Paper at Prime-3.

Mandalay Resort Group

Senior implied rating at Ba1

Issuer Rating at Ba2

Bank credit agreement at Ba1

Senior unsecured debentures and notes at Ba2

Senior subordinated debentures and notes at Ba3

Multiple seniority shelf -- Senior secured at (P)Baa3, senior unsecured at (P)Ba2, senior subordinated at (P)Ba3, and subordinated at (P)B1

Circus Finance I and II:

Guaranteed Trust Preferred shelf at (P)"Ba3".

Ratings Confirmed, and Outook changed to negative:

International Game Technology

Senior Implied at Ba1.

Senior Unsecured at Ba1.

Issuer Rating at Ba1.

Ratings that remain under review for possible upgrade

Anchor Gaming

Senior Implied at Ba2.

Issuer Rating at Ba3.

Senior subordinate at B1.

New York
Angela Jameson
Managing Director
Corporate Finance
Moody's Investors Service
JOURNALISTS: (215) 967-6233
SUBSCRIBERS: (215) 967-6233

New York
Peggy Holloway
Vice President - Senior Analyst
Corporate Finance
Moody's Investors Service
JOURNALISTS: (215) 967-6233
SUBSCRIBERS: (215) 967-6233

No Related Data.
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