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Rating Action:

Moody's assigns Ba3 to Twin River Worldwide's $275 million term loan add-on; affirms B2 CFR

04 May 2020

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

No Related Data.
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