S&P, Moody’s affirm Station debt ratings

Thursday, June 15, 2000 | 10:52 a.m.

Major credit agencies Standard & Poor's and Moody's Investors Service confirmed their credit ratings on Station Casinos Inc., following the Las Vegas company's announcement that it would acquire the Santa Fe hotel-casino for $205 million in cash.

S&P reaffirmed Station's "BB" corporate credit rating, its "BB+" bank loan rating and "B+" subordinated debt rating. Moody's maintained its "B1" to "Ba3" ratings on $1.2 billion in Station debt securities. Both agencies maintained a positive outlook on the company's ratings.

Moody's noted that Station is paying a high multiple for Santa Fe -- about 8.9 times the Santa Fe's last 12 months of cash flow -- but said Station's credit wouldn't be materially impacted. It added that the hotel-casino presented an attractive growth opportunity, given the high growth rate of the Las Vegas area, marketing synergies and Station's experience in operating local casinos.

Although the debt-financed deal will raise Station's debt load higher than initially expected, S&P said it expects earnings and cash flow to continue increasing, allowing the company to continue its development goals while keeping its leverage ratio steady.

Both S&P and Moody's raised the possibility of a credit rating increase for Station.

"If the company maintains a moderate financial policy and continues to improve credit protection measures, the ratings could be raised over the intermediate term," S&P's report said.

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