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I AGREE
02 Feb 2011
New York, February 02, 2011 -- Moody's Investors Service today assigned Caa1 Corporate Family and
Probability of Default ratings to Revel AC, LLC. A B3 was
assigned to the company's $850 million 6-year first
lien term loan and $50 million 6-year revolving line of
credit. The rating outlook is stable.
Revel AC, LLC (Revel) is a privately held company that is currently
developing Revel AC, a $2.4 billion entertainment
resort and casino located on the Boardwalk in the south inlet of Atlantic
City, NJ.
Proceeds from the $850 term loan along with proceeds from a new
$304.4 million 12% 7-year second lien mezzanine
loan (not rated) will be used to fund the remaining $1.1
billion costs to complete. These include $600 million of
remaining hard costs, $337 million of other soft costs and
$178 million of capitalized interest and fees.
New Ratings Assigned:
Corporate Family Rating at Caa1
Probability of Default Rating at Caa1
$50 million 6-year first lien revolving line of credit at
B3 (LGD 3, 37%)
$850 million 6-year first lien term loan at B3 (LGD 3,
37%)
RATINGS RATIONALE
The Caa1 Corporate Family Rating (CFR) and Probability of Default Rating
(PDR) reflect the considerable development and ramp-up risk associated
with Revel AC. Although a large portion of the casino is finished
-- the outer shell is complete -- development
risk is still meaningful. There is over $1 billion of costs
remaining on the project which is not scheduled to open for another 15
months. As a result, there are significant opportunities
for delays and unforeseen problems that could make it difficult to open
on time and on budget.
The ratings also reflect Revel's challenge of achieving targeted
business volumes in a gaming market that Moody's expects will see
a further and substantial decline in gaming revenue. The Atlantic
City gaming market is faced with increasing competition from new and more
convenient gaming venues in the northeastern U.S. Gaming
revenues in Atlantic City have declined steadily and significantly in
the past few years. Additionally, there is no assurance that
economic condition at the time of opening will be strong enough to support
the company's initial ramp-up expectations. Assuming
targeted levels are met, the company's first full year of
operations still result in high pro forma debt/EBITDA --
about 6 times.
The ratings are supported by Revel's attractive concept and design
that Moody's believes will provide it with a competitive advantage
over other Atlantic City casinos. It is particularly attractive
as it relates to the company's ability to attract mid-week
group business, as, unlike most of Atlantic City's existing
casinos, Revel is designed to accommodate large group meetings.
The attractive mix of product offerings in terms of quality and quantity
should also enable Revel to attract this highly profitable business.
The stable outlook reflects Revel's good liquidity. The proposed
financing will fully fund the remaining project costs, including
an interest reserve on the first lien term loan that will prefund two
years of interest payments, and will contain the appropriate contingency
reserves for a project of this size and scope. Additionally,
Revel's proposed mezzanine loan will pay interest in-kind
(PIK) for the first two and a half years, with the option to pay
in PIK or in cash for six months thereafter.
The B3 rating on the $50 million revolving line of credit and $850
million term loan is one-notch above Revel's Caa1 CFR.
This difference reflects the significant credit support provided by the
second lien mezzanine debt below it in the capital structure.
The ratings could be downgraded prior to opening if there is any event
that causes a delay in the project's opening or a total project
cost that is greater than currently planned. Ratings could also
be downgraded if Moody's believes that Revel will not be able obtain the
advanced bookings necessary to ramp-up at a rate to achieve targeted
business volumes. The ratings could also be lowered if Moody's
believes that recurring EBITDA less capital expenditures to total interest
expense will not approach 1.0 time by June 2013, or if the
probability of default increases for any reason.
A higher rating is not likely over the near-term given the development
status of the project and prospective nature of the rating. A higher
rating would require that the project open on time and on budget and that
Moody's believes that recurring EBITDA minus capital expenditures
to total interest expense will exceed 1.0 times.
This is a first time rating on Revel AC, LLC.
The principal methodologies used in this rating were Global Gaming published
in December 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Revel AC, LLC (Revel) is a privately held company that is developing
Revel AC, a $2.4 billion entertainment resort and
casino located on the Boardwalk in the south inlet of Atlantic City,
NJ.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
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
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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
Keith Foley
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Peter H. Abdill, CFA
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 Caa1 CFR to Revel AC; B3 to 1st lien term loan; stable outlook
No Related Data.
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