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11 Jun 2010
Madrid, June 11, 2010 -- Moody's Investors Service has today confirmed the B2 corporate family
rating (CFR) and probability of default rating (PDR) of Cirsa Gaming Corporation
S.A. (Cirsa). The rating agency has also confirmed
the B3 rating on the EUR230 million 7.875% senior notes
due 2012 issued by Cirsa Capital Luxembourg S.A. Concurrently,
Moody's has removed the provisional status on the B3 rating of the
new EUR400 million 8.75% senior notes due 2018 issued by
Cirsa Funding Luxembourg S.A., following the successful
completion of the bond issue. The outlook on all ratings is stable.
This confirmation concludes the rating review initiated by Moody's
on 1 February 2010, following Cirsa's decision to withdraw
and terminate the exchange offer for its EUR230 million notes due 2012
and EUR270 million notes due 2014, which had put pressure on the
company's liquidity profile and refinancing requirements.
"The rating confirmation reflects the strengthening in the company's
liquidity profile and reduced refinancing risk following the successful
completion of the EUR400 million bond due 2018," says Iván
Palacios, a Moody's Vice President -- Senior Analyst,
and lead analyst for the company.
Cirsa has used the proceeds from this bond issuance to repay short-to
medium-term debt maturities, including the EUR270 million
notes due 2014, as well as to strengthen its cash balance.
In addition to the new bond issue, Cirsa is putting in place a new
EUR30 million senior secured revolving facility.
"Cirsa has therefore alleviated the pressures on its liquidity profile,
at a time when the company's operating performance is showing signs
of improvement despite the adverse macroeconomic environment,"
In Q1 2010, Cirsa reported EUR57.6 million EBITDA,
representing 12% growth on a sequential basis, driven by
improved performance in the Slots division in Spain as well the recovery
in the Bingo division. Based on this performance, Moody's
believes that the company is on track to meet the business plan for the
year ended December 2010.
The B2 rating factors in Moody's expectation that Cirsa will continue
to improve its operating performance, particularly in the Slots
and B2B divisions, while successfully rolling-out bingo hall
plans in Mexico, smoothly implementing its agreement with Casino
Club in Argentina and managing execution risk from its new venture in
Moody's notes that as a result of the weak economic environment
in Spain, Cirsa is showing greater reliance on Latin America as
a driver of group profitability, a trend which is unlikely to change
in the short term. While Moody's remains cautious as regards
further impact of the economic downturn on Cirsa's business in Spain,
we note that the company is also likely to benefit from the growth prospects
of projects that are expected to start generating revenue and EBITDA from
2010, including Casino de Rosario in Argentina, Mexican electronic
bingo, Casino Valencia in Spain, or the Video Lottery Terminals
--VLT -- project in Italy.
The B2 rating assumes Cirsa will be able to successfully withstand (i)
the current European recessionary environment as well as (ii) currency
volatility and economic and regulatory instability in Latin America.
The rating also factors in Moody's expectation that Cirsa will continue
to operate within the framework of its leverage and coverage targets (as
reported by the company and not adjusted by Moody's) of Net debt/EBITDA
below 4x, and EBITDA/Net interest expense above 4x.
Downward pressure could be exerted on Cirsa's rating if the company's
leverage were to increase over 5.25x on an adjusted basis,
whether as a result of a change in the financial policy or as a result
of a deterioration in operating performance. The rating could also
come under pressure if liquidity is deemed to have become inadequate to
support operating performance or debt servicing, particularly in
light of the bond maturity in 2012.
Conversely, upward rating pressure will depend on Cirsa's
ability to operate under a financial profile consistent with credit metrics
such as Debt/EBITDA (as adjusted by Moody's) below 4.25x
on a sustainable basis.
The ratings confirmed today are as follows:
- B2 CFR and PDR of Cirsa Gaming Corporation S.A.
- B3 rating (equivalent to a Loss Given Default (LGD) assessment
of LGD 4) on the EUR230 million 7.875% senior notes due
2012 issued by Cirsa Capital Luxembourg S.A.
- B3 rating (LGD 4) on the recently issued EUR400 million 8.75%
senior notes due 2018 issued by Cirsa Funding Luxembourg S.A.
The last rating action was implemented on 27 April 2010, when Moody's
assigned a (P)B3 to Cirsa's new senior notes due 2018.
The principal methodology used in rating Cirsa was Moody's "Global
Gaming Industry Rating Methodology", published in December
2009 and available on www.moodys.com in the Ratings Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Headquartered in Terrassa, Spain, Cirsa is a leading Spanish
gaming company with substantial operations in Italy and Latin America.
In FY2009, Cirsa reported net operating revenues of ca. EUR1.1
billion and EBITDA of EUR209 million.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paloma San Valentin
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's confirms ratings of Cirsa; stable outlook
No Related Data.
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