Bally gets another credit downgrade
Bally's (NYSE: BALY ) completed a dubious trifecta as its credit rating was downgraded by a third major credit rating agency.
Today, Fitch Ratings downgraded the regional casino operator's credit rating to "B" from "B+", citing increased debt. The research firm has a "negative" outlook on the rating, which would move it further into non-investment grade territory.
The downgrade reflects relatively high leverage, which is above Fitch's rating downgrade sensitivity, and the current expectation that leverage will remain elevated for an extended period of time; execution risks in project financing and development in Chicago; and other potential development opportunities, ” the research firm noted.
The research firm added that Bally's expansion opportunities, including plans to build a $1.1 billion casino hotel in Chicago, and weakness in its North American digital unit continue to impact earnings before interest, taxes, depreciation, and amortization (EBITDA). burden).
Interesting timing for Bally’s credit downgrade again
With Fitch's move today, all three major rating agencies have downgraded Bally's further to junk status in less than two months. Moody's Investors Service did just that last week.
The gaming company's credit downgrade comes as it seeks to raise $800 million in financing to complete its Chicago integrated resort, meaning creditors will face higher interest rates due to the lower credit rating Bally may demand.
While it could just be coincidence, Fitch's downgrade comes the day before the scheduled closing of Las Vegas' Tropicana Hotel, the operator's only location on the Strip. The downgrade of Bally's credit rating comes as the company's largest shareholder, Standard General, seeks to acquire the company for $15 per share.
"The negative outlook reflects leverage, suggesting the company's operating profile could easily approach Fitch's 7.0x downgrade sensitivity, which is likely to remain elevated during Chicago construction. The outlook also reflects the Standard General acquisition Uncertainty over the outcome of the offer for the remaining shares in Bally's," Fitch noted.
Bally ##’s Leverage Problem
In Fitch's view, Bally's is hampered by rising debt as it seeks funding to complete its permanent location in Chicago. The ratings agency estimates the operator's earnings before interest, taxes, depreciation, amortization and restructuring or lease costs (EBITDAR) will reach 7.2 times by 2023, a figure that could increase as the Windy City project is further developed.
"The proposed Chicago casino development could cause consolidated leverage metrics to rise over the medium term, until 2026, and total consolidated leverage during construction may remain outside Fitch's sensitivity range," Fitch said.
The research firm also noted that uncertainties, including continued high inflation, could put pressure on Bally's regional casino business, noting that these verticals are vulnerable due to the operator's lagging position in iGaming and online sports betting. Not a "weakness" - a key credit driver in the medium term. "
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Source: www.casino.org
