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02 Feb 2011
Approximately $235 million of rated debt affected
New York, February 02, 2011 -- Moody's Investors Service has assigned B1 ratings to Global Cash
Access, Inc.'s ("GCA" or the "Company")
$235 million of proposed senior secured credit facilities comprising
a $30 million revolving credit facility and a $205 million
term loan facility. As part of the rating action, Moody's
affirmed GCA's B1 Corporate Family Rating (CFR) and revised the
Company's Probability of Default Rating to B2, from B1.
The Company plans to use the proceeds from the term loan issuance and
about $3 million of cash on hand to refinance existing indebtedness,
and pay fees and expenses. Moody's also affirmed the B3 rating
for GCA's senior subordinated notes, which will be withdrawn
upon full repayment of the notes at the close of the transaction.
The outlook for ratings is stable.
Moody's has taken the following rating actions:
Issuer: Global Cash Access, Inc.
....US$30 million Senior Secured Bank
Credit Facility -- Assigned, B1, LGD3,
37 %
....US$205 million Senior Secured Bank
Credit Facility-- Assigned, B1, LGD3,
37 %
..Corporate Family Rating -- Affirmed,
B1
..Probability of Default Rating -- Lowered
to B2 to B1
....8.75% Senior Subordinated
Notes due 2012 -- Affirmed, B3 (LGD-5,
77%), to be subsequently withdrawn
....Outlook -- Stable
RATINGS RATIONALE
The affirmation of GCA's Corporate Family Rating reflects Moody's
view that the Company's good free cash flow generation and interest
coverage metrics continue to support the B1 rating, despite sustained
decline in operating performance during a severe economic downturn and
the loss of its largest customer in November 2010. Furthermore,
Moody's believes that the risks of further erosion in pricing and
loss of significant customers are mitigated with the recent successes
in renewing multi-year contracts with key customers. The
rating agency expects that a combination of new business growth,
stabilizing same store sales, and prioritization of debt reduction
should help the Company restore its balance sheet and drive debt-to-EBITDA
leverage to 2.5x-to-3.0x range over the next
12-to-18 months.
The B1 Corporate Family Rating reflects GCA's leading market position
as a cash access services provider to U.S. gaming establishments,
its moderate financial risk, and good liquidity supported by moderate
levels of free cash flow generation. The rating is constrained
by the extremely challenging operating conditions in the U.S.
gaming industry, the Company's intensely competitive operating
environment, and the ongoing pricing pressure on operating margins.
The rating also considers GCA's high customer concentration as well
as growing challenges from cashless gaming, which could result in
lower demand for GCA's cash access products, and the potential
for continued margin pressure due to shifts in consumption patterns from
higher margin cash advance products to ATM transactions.
The stable outlook reflects Moody's expectations that GCA's
EBITDA will stabilize during 2011 and that the Company will prioritize
debt repayment such that leverage could be maintained at less than 3.0x.
What Could Drive the Rating -- Up
Although not expected at this time, Moody's could raise GCA's
rating if the Company's business environment improves significantly,
it generates solid cash flows driven by improved profitability and revenue
growth, and sustain debt-to-EBITDA leverage of less
than 2.5x.
What Could Drive the Rating -- Down
The rating or the outlook could come under pressure if transaction volumes
continue to decline, price erosion depresses EBITDA margins,
or the Company loses large customer relationships, which result
in a material decline in profitability. The rating or the outlook
could be lowered if deteriorating operating performance or shareholder
friendly fiscal policies drive debt-to-EBITDA leverage to
above 3.5x and free cash flow generation falls to less than 10%
of total debt over an extended period of time, or liquidity becomes
weak.
The principal methodologies used in this rating were Global Business &
Consumer Service Industry Rating Methodology published in October 2010,
and Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
June 2009.
The last rating action on GCA was on June 27, 2008, when Moody's
confirmed the Company's B1 CFR with a stable outlook.
Headquartered in Las Vegas, NV, Global Cash Access,
Inc., a wholly owned subsidiary of Global Cash Access Holdings
Inc., is a leading provider of cash access products and related
services to the gaming industry in the U.S. and several
international markets. GCA reported $617 million in revenues
for the last twelve months period ended September 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information, and
confidential and proprietary Moody's Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Raj Joshi
Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns B1 rating to Global Cash Access' bank facilities
No Related Data.
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