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Global Credit Research - 01 Jul 2010
Approximately $265 million of rated debt affected
New York, July 01, 2010 -- Moody's Investors Service today affirmed Greenwood Racing, Inc.'s
("Greenwood") B2 Corporate Family Rating (CFR) and stable
rating outlook. Concurrently, Moody's revised Greenwood's
Probability of Default Rating (PDR) to B2 from B3, and raised the
senior secured first lien bank loan rating to B1 from B2.
The affirmation of Greenwood's B2 CFR reflects the company's
solid operating performance and strong market fundamentals. The
B2 rating is also supported by Greenwood's modest financial leverage
with adjusted debt/EBITDA of 3.0 times for the twelve months ending
March 28, 2010.
Since the opening of Greenwood's permanent facility, Parx
Casino ("Parx"), in December 2009, the company
has seen moderate year-over-year increase in slot revenue,
traffic trends and guest spend. According to Pennsylvania's
Gaming Control Board, Parx continues to report monthly slot win-unit-day
in excess of $300, the highest amongst its peers in Pennsylvania's
market. "We believe Greenwood could be benefiting,
to some degree, at the expense of Atlantic City, because of
its more convenient location to its local customers in Philadelphia metropolitan
area and being a newer facility," explained Moody's
analyst John Zhao.
Despite Greenwood's recent solid operating performance, the
B2 CFR is currently constrained by the company's upcoming debt maturity
related to its first lien term debt in November 2011 and the rising competition
from the opening of SugarHouse Casino's in September 2010,
a casino located within 20 miles radius from Parx. The current
rating also incorporates the company's single asset profile,
its weak interest coverage on (EBITDA-Capex)/Interest basis and
negative free cash flow generation, largely due to the ongoing development
The stable outlook anticipates that in the medium term Greenwood's
overall operating performance will likely remain resilient to the economic
pressures. Moody's expects the introduction of table games
in the 2H 2010 to further drive traffic to the property and somehow offset
the negative impact from new competition. The outlook also assumes
the company would likely timely address its upcoming debt maturity.
Failure of doing so would likely result in negative rating actions.
Conversely, ratings could improve if Greenwood is successful in
refinancing its debt and its expansion project ramps up as anticipated.
The revision of the PDR to B2 from B3 was prompted by the revision in
Greenwood's family recovery rate assumption to 50% from 65%
according to Moody's Loss Given Default methodology. The
50% family recovery rate reflects the change of Greenwood's
debt structure to a bond/bank construct from its previous all bank structure,
following the issuance of shareholder notes (not rated by Moody's) in
November 2009 to support its development capital spending. Therefore,
Moody's revised the instrument rating on the $265 million
senior secured term loan to B1 from B2 recognizing senior secured term
debt's senior position in the company's capital structure
relative to the company's subordinated shareholder notes,
which are contractually and effectively subordinated to the senior debt
Please refer to moodys.com for an updated credit opinion.
The rating action is as follows:
Corporate Family Rating -- affirmed at B2
Probability of Default Rating -- upgraded to B2 from B3
$265 million senior secured term loan due 2011 -- upgraded
to B1 (LGD3, 40%) from B2 (LGD3, 33%)
Rating outlook - stable
Moody's last rating action occurred on October 20, 2006 when Moody's
assigned a B2 to Greenwood's term loan.
The principal methodology used in rating Greenwood Racing, Inc.
was Moody's Global Gaming Methodology, published in December 2009
and available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Greenwood Racing, Inc. owns and operates the Parx Casino,
slots gaming facility, in Bensalem, Pennsylvania, a
20-minute drive from downtown Philadelphia. On December
18, 2009, the company opened its permanent facility,
which features approximately 3,300 slot machines. The company
also conducts live racing for thoroughbred horses at the Philadelphia
Park facility located adjacent to the Parx Casino. The company
generated approximately $447 million in net revenues in the twelve-month
period ended March 28, 2010.
Corporate Finance Group
Moody's Investors Service
Kendra M. Smith
Corporate Finance Group
Moody's Investors Service
Moody's affirms Greenwood Racing's CFR at B2; raises bank loan to B1
No Related Data.
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