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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

Moody's confirms Twin River's B1 Corporate Family Rating; outlook is stable

25 Mar 2014

Approximately $480 million of rated debt affected.

New York, March 25, 2014 -- Moody's Investor Service confirmed Twin River Management Group, Inc.'s ("Twin River") B1 Corporate Family Rating and raised the company's Probability of Default Rating to B1-PD from B2-PD. Moody's also assigned a B1 rating to Twin River's proposed $40 million, 5-year revolver and $480 million 7-year term loan B. The proposed bank facilities will be used to finance the $250 million acquisition of HRB, refinance the existing term loan B, and pay fees and expenses. The rating outlook is stable.

This rating action concludes Moody's review for downgrade that commenced on December 17, 2013. Moody's will withdraw the ratings on Twin River's existing revolver and term loan when the new transaction closes. The ratings are subject to receipt and review of final terms and conditions.

Rating confirmed:

Corporate Family Rating, at B1

Rating upgraded:

Probability of Default Rating, to B1-PD from B2-PD

Ratings assigned:

$480 million 7-year senior secured term loan B, at B1 (LGD 4, 50%)

$40 million 5-year senior secured revolver, at B1 (LGD 4, 50%)

Ratings confirmed and to be withdrawn upon transaction closing:

$260 million senior secured term loan due 2018, at B1 (LGD 3, 35%)

$25 million senior secured revolver expiring 2018, at B1 (LGD 3, 35%)

RATINGS RATIONALE

The confirmation of Twin River's B1 Corporate Family Rating reflects the company's increased geographic diversification once it completes its pending acquisition of the Hard Rock Biloxi Hotel & Casino ("HRB") in Biloxi, MS. Moody's estimates that HRB will contribute approximately 22% of 2014 pro-forma consolidated EBITDA. Twin River currently owns the Twin River casino near Providence, RI. The addition of the HRB will provide Twin River with another source of earnings to help offset the expected material negative impact on EBITDA from new casinos opening within a 50 mile radius of Twin River. A new slot facility is expected to open in nearby Plainridge, MA by the end of 2015, a full size casino resort is expected to open in the Boston area by early 2017, and another full size casino may open in Tauton, MA by 2018.

The B1 Corporate Family Rating also considers the reasonableness of the acquisition price multiple (estimated at around 7.0 times) relative to recent regional transactions, the well recognized Hard Rock brand, and Moody's expectation that Twin River can reduce pro-forma leverage from 3.8 times to around 3.0 times by 2015 assuming modest growth in EBITDA and use of free cash flow to reduce debt.

Twin River's Probability of Default Rating was raised to B1-PD, reflecting the utilization of a lower family recovery rate of 50% (previously 65%). The lower average family recovery rate reflects the change in Twin River bank facilities to a covenant lite structure which in Moody's view does not give lenders the same ability to take prompt action if Twin Rivers credit profile deteriorates, thereby lowering the potential average recovery values. The B1 assigned to the proposed bank facilities reflects this covenant lite structure. The proposed bank facilities will have only one financial covenant (debt/EBITDA) that will be tested only if revolver outstandings exceed 20% of the $40 million commitment. The facility will be secured by all assets (excluding Colorado) and guaranteed by Twin River's parent ("Twin River Worldwide Holdings, Inc.") and operating subsidiaries that own the Twin River casino, and the HRB.

The stable rating outlook reflects Moody's expectation that Twin River's EBITDA in 2014 will increase due to the implementation of table games in mid-2013 and the opening of a new hotel tower (154 rooms) at HRB in February 2014 and that the company will reduce debt/EBITDA to between 3.0x to 3.5x. The stable outlook also considers that Twin River has good liquidity. Cash flow from operations is projected to exceed capital spending needs and the credit agreement is expected to include an 50% excess cash flow sweep. The company's $40 million revolver is not expected to be drawn.

Rating upside is limited at this time given Twin River's small scale and competition from legalized gaming in Massachusetts. However, ratings could be upgraded over the longer-term if Twin River can maintain debt/EBITDA below 3.5x while absorbing the expected decline in earnings caused by new supply. Ratings could be lowered if debt/EBITDA rises and is sustained above 5.0x or if monthly gaming revenue trends in Rhode Island or Mississippi deteriorate materially in advance of legalized gaming in Massachusetts.

The principal methodology used in this rating was the Global Gaming published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Twin River Management Group, Inc.'s owns and operates the Twin River casino located near Providence, Rhode Island. The Twin River casino operates approximately 4,500 video lottery terminals (VLTs) on behalf of the State of Rhode Island. Twin River is entitled to a 27.8% share of the VLT income. In addition, Twin River began operations of 66 table games in June 2013 that was increased to 80 in late November. Estimated 2013 annual gross revenues are around $202 million. The company is private and does not disclose public financials.

The Hard Rock Hotel & Casino in Biloxi, Mississippi, is a subsidiary of Leucadia National Corp. The property consists of 53,800 square feet of gaming space, a hotel tower with 325 rooms, five restaurants and a new hotel tower opened in February 2014 with 154 rooms. Estimated 2013 annual gross revenues are around $140 million.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Peggy Holloway
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Janice Ann Hofferber
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's confirms Twin River's B1 Corporate Family Rating; outlook is stable
No Related Data.
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