Improved cash flow helps Golden Nugget rating jump
Golden Nugget Inc. earned a bump up in its credit ratings from Moody's Investors Service but remains deep in junk territory.
The general and probability of default grade for the company, a subsidiary of Landry's Inc., was raised to Caa3 from Ca, or to speculative and very high credit risk from highly speculative and likely in or near default, in the Moody's system. A second priority bank loan was boosted to Ca from C, and the first priority loan stayed at Caa3.
A major reason cited by Moody's was the improved cash flow, as measured by earnings before interest, depreciation, taxes, depreciation and amortization, to $51 million for the year ended June 30 from $47 million for the same period in 2011.
"However, despite this operating improvement, Golden Nugget's leverage is still significant ... and Moody's believes the company will continue to face a difficult operating environment in the downtown Las Vegas market," Moody's wrote. This will make it difficult to pay shrink debt or grow earnings.
By the end of 2014, Golden Nugget has $446 million in loans coming due.
Besides the Fremont Street location, Golden Nugget owns a similarly named hotel in Laughlin. Annual revenues run about $245 million.
Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.
