NOTE: On May 19, 2020, the press release was corrected as follows: In the headline, first sentence of the first paragraph and second sentence of the third paragraph of the
press release, changed the rating assignment for Twin River Worldwide Holdings, Inc.'s $275 million add-on to Ba3. In the list of Assignments under Twin River Worldwide Holdings, Inc., changed the rating action for Senior Secured Bank Credit Facility to “Assigned Ba3 (LGD3).” Revised Release follows.
NOTE: On May 04, 2020, the press release was corrected as follows: In the first sentence of the third paragraph the Corporate Family Rating was changed to B2. Revised Release follows.
New York, May 04, 2020 -- -- Moody's Investors Service today assigned a Ba3
rating to Twin River Worldwide Holdings, Inc.'s ("TRWH")
$275 million add-on to the company's existing $298
million outstanding term loan B due 2026. TRWH's B2 Corporate
Family Rating, B2-PD Probability of Default Rating,
and Ba3 senior secured bank loan rating were affirmed. The company's
SGL-2 Speculative Grade Liquidity rating and negative outlook remain
unchanged.
TRWH will use the proceeds from the add-on to fund the recently
announced acquisition of three casinos as well as provide for an additional
$75 million of liquidity in the form of cash. TRWH also
announced that it obtained substantial covenant relief from its lenders.
In addition to the $75 million increase in unrestricted cash and
the easing of covenants, the affirmation of TRWH's B2 Corporate
Family Rating considers the attractive purchase multiples based on the
acquired assets' longer-term earnings potential. The
assignment of a Ba3 rating to TRWH's term loan B add-on considers
that it ranks pari-passu to the company's existing term loan
and is secured and guaranteed on a similar basis.
The purchase price for two Eldorado properties on a combined basis represents
an implied trailing twelve-month proforma EBITDA multiple of approximately
4.1x, excluding any potential impact from possible synergies.
The Bally's purchase price represents an implied trailing twelve-month
EBITDA multiple of approximately 2.1x, excluding any potential
impact from possible synergies. Under normal operating conditions,
these acquisitions would be immediately accretive to earnings and would
have a modest deleveraging impact on the company. Pro forma net
debt/EBITDA is 4.3x compared to 4.5x net debt/EBITDA for
the latest 12-month period ended March 31, 2020. The
acquisitions also further diversify the company's geographic diversification
into three additional states.
On April 24, TRWH announced that it entered into an agreement with
Eldorado Resorts, Inc. to acquire Eldorado Shreveport Resort
and Casino in Shreveport, Louisiana and the Mont Bleu Resort Casino
& Spa in Lake Tahoe, Nevada for $155 million.
TRWH also announced that it entered into an agreement with Caesars Entertainment
Corporation and Vici Properties Inc. to acquire Bally's Atlantic
City Hotel & Casino for $25 million in cash. The Shreveport
and Mont Bleu transaction is expected to close in the first half of 2021
and is conditioned upon consummation of the merger of Eldorado and Caesars.
The Bally's transaction is expected to close in late 2020 or early 2021.
Until the period March 31, 2021, TRWH will not be required
to comply with the maximum total net leverage ratio covenant applicable
under the bank credit facility, but instead will be required to
comply with a minimum liquidity covenant tested at the last day of each
month during the leverage ratio covenant relief period. As part
of the amendment, TRWH also agreed not to pay or declare dividends
on its common stock or make other restricted payments, complete
investments or acquisitions (other than those previously announced) during
the leverage ratio covenant relief period.
Assignments:
..Issuer: Twin River Worldwide Holdings, Inc.
....Senior Secured Bank Credit Facility,
Assigned Ba3 (LGD3)
Affirmations:
..Issuer: Twin River Worldwide Holdings, Inc.
.... Probability of Default Rating,
Affirmed B2-PD
.... Corporate Family Rating, Affirmed
B2
....Senior Secured Bank Credit Facility,
Affirmed Ba3 (LGD3 from LGD2)
....Senior Unsecured Regular Bond/Debenture,
Affirmed Caa1 (LGD5)
Outlook Actions:
..Issuer: Twin River Worldwide Holdings, Inc.
....Outlook, Remains Negative
RATINGS RATIONALE
TRWH's B2 Corporate Family Rating incorporates the company's positive
free cash flow during periods of normal operation, and improved
geographic diversification resulting from acquisitions during the past
year along with pending acquisitions. Also supporting the rating
is TRWH's significant cash balance and no meaningful maturities
until 2024. However, Twin River remains a relatively small
regional gaming company in terms of revenue and will still have heavy
exposure to the heightened level of competition for its Rhode Island properties
coming from the increased gaming supply in Massachusetts.
Additionally, Moody's expects a meaningful decline in Twin
River's earnings over the next few months from efforts to contain
the coronavirus and the potential for a slow recovery once properties
reopen. Given the closure of properties and operations, EBITDA
and free cash flow will be negative for an uncertain period of time.
Twin River's credit metrics and liquidity will be under pressure
during this period and could deteriorate quickly if facility closures
are extended.
TRWH's ratings also incorporate the company's low governance
risk. Governance risk is considered low given Twin River's public
ownership, track record of maintaining relatively low leverage,
and a modest dividend payout since becoming a public company. TRWH
has also historically operated with debt/EBITDA below 4.0x,
and following debt financed acquisitions where debt/EBITDA has risen above
4.0x, has demonstrated the ability and willingness to reduce
leverage to a pre-acquisition level.
The rapid and widening spread of the coronavirus outbreak, deteriorating
global economic outlook, falling oil prices, and asset price
declines are creating a severe and extensive credit shock across many
sectors, regions and markets. The combined credit effects
of these developments are unprecedented. The gaming sector will
be one of the sectors most significantly affected by the shock given the
non-essential nature of casino gaming and the sector's historically
high sensitivity to consumer demand and sentiment. More specifically,
TRWH's continued exposure to travel disruptions and discretionary
consumer spending, have left it vulnerable to shifts in market sentiment
in these unprecedented operating conditions makes it vulnerable to the
outbreak continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under
our ESG framework, given the substantial implications for public
health and safety. TRWH's ratings reflect the breadth and
severity of the shock, and the broad deterioration in credit quality
it has triggered.
The negative outlook acknowledges that the coronavirus situation continues
to evolve, and a high degree of uncertainty remains regarding the
timing of facility re-openings and the pace at which consumer spending
at Twin River's casinos will recover. As a result, the company's
liquidity and leverage could deteriorate quickly over the next few months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be downgraded if we anticipate that Twin River's earnings
decline or liquidity deterioration will be deeper or more prolonged because
of actions to contain the spread of the coronavirus or reductions in discretionary
consumer spending.
A ratings upgrade is unlikely given the weak operating environment and
continuing uncertainty related to the coronavirus. An upgrade would
require a high degree of confidence on Moody's part that the gaming sector
has returned to a period of long-term stability, and that
Twin River demonstrate the ability to generate positive free cash flow,
maintain good liquidity, and operate at a debt/EBITDA level at 5.0x
or lower.
Twin River owns and operates four casinos and one racetrack in four states
-- two casinos in Rhode Island, one casino in Mississippi,
one casino in Delaware, and one racetrack in Colorado. On
March 28th, 2019, Twin River completed its merger with Dover
Downs Gaming & Entertainment and also became a widely held publicly
traded gaming operator listed on the NYSE as TRWH. Additionally,
late last year, the company acquired a subsidiary of Affinity Gaming
that owns Golden Gates, Golden Gulch and Mardi Gras in Blackhawk,
Colorado. The company also agreed to acquire three properties from
Eldorado as well as Bally's Atlantic City Hotel & Casino. Consolidated
net revenue for the fiscal year ended December 31, 2019 was $523
million.
The principal methodology used in these ratings was Gaming Industry published
in December 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1099757.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent() and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Keith Foley
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653