NEW YORK, Dec. 15, 2008–Standard & Poor’s Ratings Services said today that its ‘CC’ corporate credit rating on Las Vegas-based Station Casinos Inc. remains on CreditWatch with negative implications, where it was placed Nov. 26, 2008. The ‘C’ rating on the company’s senior unsecured and subordinated debt issues also remains on CreditWatch with negative implications.
In addition, Standard & Poor’s lowered its issue-level rating on Station’s senior secured debt to ‘CCC’ from ‘B-‘, and revised the CreditWatch implications on this rating to negative from developing.
These rating actions follow today’s announcement by the company that certain of the conditions in its previously announced private exchange offer will not be satisfied, and that it is terminating the exchange offer. The lowering of the secured debt rating and revision of the CreditWatch implications reflect the termination of the exchange offer. We previously indicated that our preliminary expectation, in the event the exchange succeeded, was for a corporate credit rating of ‘B-‘. The current ‘CCC’ issue rating on the senior secured debt is now two notches higher than the ‘CC’ corporate credit rating, reflecting our notching criteria for a ‘1’ recovery rating.
“The continued CreditWatch listing reflects our concern that, absent completion of the exchange offer or an amendment to the terms of its senior secured credit facility, Station will violate its financial covenants in the current quarter,” said Standard & Poor’s credit analyst Ben Bubeck. “As we have previously stated, we are skeptical that any amendment to the credit facility that does not include a significant equity infusion will allow Station to meet debt service requirements over the intermediate term, given its extremely weak credit measures, including consolidated EBITDA interest coverage of just 1.2x as of Sept. 30, 2008. We will continue to monitor management’s efforts to avoid breaching its financial covenants in the near term.”