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Rating Action:

Moody's lowers Revel AC's CFR to Caa3 from Caa2; negative rating outlook

Global Credit Research - 05 Feb 2013

Approximately $990 million of rated debt affected.

New York, February 05, 2013 -- Moody's Investors Service today lowered Revel Atlantic City LLC's ("Revel") ratings. The company's Corporate Family Rating was lowered to Caa3 from Caa2 and its Probability of Default Rating was lowered to Caa3-PD from Caa2-PD. Revel's $890 million term loan 2017 was lowered to Caa2 from Caa1, and the Caa1 rating on Revel's $100 million revolver was withdrawn. The rating outlook is negative.

This rating action concludes the review process that was initiated on August 23, 2012.

The downgrade and negative rating outlook consider Moody's view that despite Revel's ability to obtain additional liquidity, the company's significant leverage coupled with an unfavorable earnings outlook suggest that Revel's capital structure is not sustainable in its current form, and will require a restructuring that involves some level of impairment. Ratings would be lowered if Revel pursues a recapitalization that Moody's considers to be a distressed exchange.

Ratings lowered:

Corporate Family Rating to Caa3 from Caa2

Probability of Default Rating to Caa3-PD from Caa2-PD

$890 million term loan due 2017 to Caa2 (LGD 3, 38%) from Caa1 (LGD 3, 38%)

Ratings withdrawn:

$100 million senior secured first lien credit facility due 2014 rated Caa1

RATINGS RATIONALE

Although Revel was able to obtain additional liquidity in December 2012 -- the company amended its existing revolver agreement to increase its limit by $25 million to a total of $125 million (not-rated) and add a new $125 million term loan (not-rated) -- Moody's continues to believe that the company will not be able to achieve targeted business volumes and earnings necessary to cover its fixed charge burden, and that the additional liquidity obtained is not enough to ensure the company's longer-term viability.

Revel has not yet generated a profit. EBITDA was negative $69 million for the nine month period ended September 30, 2012. While Moody's believes the additional liquidity provides Revel enough cash to cover this EBITDA deficit and its fixed charges for short period of time, the monthly gaming revenue results for the Atlantic City gaming market suggest that the company will not be able to generate positive EBITDA in the foreseeable future.

Moody's expects that additional gaming supply scheduled for the Northeast in the next two years will put further pressure on the revenue and earnings of Revel and other Atlantic City casinos. Additionally, gaming demand, already negatively impacted by Hurricane Sandy, relative weak demand trends, and a significant increase in gaming supply in neighboring jurisdictions, will be further negatively impacted by a reduction in consumer discretionary income resulting from higher taxes. Other significant challenges specific to Revel that Moody's believes puts the sustainability of Revel's current capital structure in doubt include the company's ability to maintain covenant compliance along with its ability to service the interest on its second lien notes when Revel is required to make cash interest payments beginning September 2014.

Revel Atlantic City, LLC is a privately held company that developed Revel Resort, a $2.4 billion entertainment resort and casino located on the Boardwalk in the south inlet of Atlantic City, NJ. Revel had its grand opening on Memorial Day weekend, May 25, 2012.

The principal methodology used in rating Revel Entertainment was the Global Gaming Industry Methodology 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.

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.

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: 212-553-0376
SUBSCRIBERS: 212-553-1653

Kendra M. Smith
MD - Corporate Finance
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 lowers Revel AC's CFR to Caa3 from Caa2; negative rating outlook
No Related Data.

 

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