Investor service considers downgrade of Boyd Gaming Corp.

Boyd Gaming Corp. is facing a potential downgrade from Moody's Investor Service over the casino operator's ability to sustain a required debt to cash flow leverage.

The announcement comes the day after Boyd Gaming said it reduced a fourth quarter net loss but saw its cash flows in several of its gaming markets hurt by reduced consumer spending.

Moody's placed the company on review primarily because the Las Vegas locals gaming market, where the company operates the Coast Casinos brand, hasn't shown significant recovery from the declining economy of the past two years.

Moody's said the Las Vegas market accounts for roughly 40 percent of Boyd Gaming's consolidated cash flow.

"Earnings visibility in the Las Vegas locals market remains weak and we are concerned that Boyd may experience a further and significant (cash flow) decline from that business segment in 2010," Moody's senior vice president Keith Foley said in a statement.

Foley said the rating service's review will focus on Boyd Gaming's ability and willingness to reduce leverage to a level considered more appropriate for its current rating of B1.

Moody's will also consider the company's ability to maintain compliance with its bank agreement financial covenants.

"Although the financial covenants in Boyd's bank agreement were recently relaxed, continued and significant declines in consolidated (cash flow) could challenge the company's ability to maintain compliance," Foley said.

Moody's last rating action on Boyd Gaming was in December after the casino operator made a non-binding $2.45 billion offer to acquire bankrupt rival Station Casinos. Moody's said the company's rating were not hurt by the offer.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.