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Rating Action:

Moody's upgrades Downstream's CFR to B2 following completion of refinancing

22 Feb 2018

New York, February 22, 2018 -- Moody's Investors Service (Moody's) today upgraded Downstream Development Authority's (DDA) Corporate Family Rating to B2 from B3, and its Probability of Default Rating to B2-PD from B3-PD. The B2 rating on DDA's $270 million senior secured notes due 2023 was affirmed. The rating outlook is stable.

This rating action follows the closing of DDA's new $40 million term loan (unrated) and new $270 million senior secured notes due 2023. Proceeds from these new debt issues were used to refinance DDA's $32 million first lien credit facility and $265 million senior secured notes due 2019. Although $42 million of the senior secured notes have not been tendered, DDA plans to redeem the remaining notes outstanding on March 3, 2018. Once these notes have been redeemed, Moody's will withdraw the rating on these notes.

This completes the review for upgrade that Moody's initiated on January 18, 2018.

"The upgrade reflects the meaningful extension of DDA's debt maturity profile as a result of the refinancing with the company's earliest debt maturity being four years from now," stated Keith Foley, a Senior Vice President at Moody's.

Upgrades:

..Issuer: Downstream Development Authority

.... Probability of Default Rating, Upgraded to B2-PD from B3-PD

.... Corporate Family Rating, Upgraded to B2 from B3

Outlook Actions:

..Issuer: Downstream Development Authority

....Outlook, Changed To Stable From Rating Under Review

Affirmations:

..Issuer: Downstream Development Authority

....Senior Secured Regular Bond/Debenture, Affirmed B2 (LGD4)

RATINGS RATIONALE

Key credit concerns include DDA dependence on one casino to generate all of its revenue and cash flow and small scale with annual net revenue of just $170 million. As a result, the company is naturally subject to greater risks than a multi-facility and more geographically diversified gaming company. DDA's lack of diversification, along with the company's relatively high debt/EBITDA at about 5.4 times, makes it more vulnerable to market conditions including, regional economic swings in its only market area, higher promotional activity, and possible earnings compression.

Positive credit consideration considers that minimal capital expenditure requirements and lack of near-term debt maturities will enable DDA to continue to generate positive annual free cash flow after interest, capital expenditures, and cash distributions of between $8 million and $10 million made to the Quapaw Tribe of Oklahoma, the owner of DDA and the Downstream Casino Resort.

The stable rating outlook reflects DDA's positive free cash flow and stable operating performance despite new competition that recently opened nearby. DDA's ratings could be upgraded if the company demonstrates the ability and willingness to maintain debt/EBITDA below 4.0 times and maintains good liquidity. DDA's ratings could be downgraded if the company's debt/EBITDA rises above 6.0 times for any reason or if liquidity weakens materially.

The principal methodology used in these ratings was Gaming Industry published in December 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

DDA is a wholly owned unincorporated instrumentality of the Quapaw Tribe of Oklahoma, a federally recognized Native American tribe with approximately 4,900 enrolled members. Downstream owns and operates the Downstream Casino Resort, a Native American casino located at the point where the state borders for Kansas, Missouri and Oklahoma meet -- its casino is in Oklahoma and part of its parking lot is located in Kansas.

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 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.

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.

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

Janice Hofferber, CFA
MD - Corporate Finance
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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