Moody’s considers credit downgrade

Wednesday, Aug. 8, 2001 | 10:49 a.m.

Moody's Investors Service has placed the credit ratings of Station Casinos Inc. on review for possible downgrade.

The decision will affect $1.43 billion in bonds and bank debt. Station currently holds ratings ranging from "B1" to "Ba3." These ratings are defined as "speculative" by Moody's, and are not considered investment grade.

Moody's said the review was prompted in part by Station's recently announced plans to buy back as many as 10 million shares of its own stock.

"Moody's is concerned that a majority of free cash flow will be used to repurchase shares and/or for new development activities, and not to reduce debt," the Moody's report said.

The agency said it originally expected that cash flow from the Reserve and Fiesta could be used to reduce Station's debt load over the next 12 to 18 months. But a slowing economy, increased competition and the share buyback make it very likely that Station's debt will remain more than 4 times the company's annual cash flow through 2002, Moody's said.

In conducting the review, Moody's said it will consider Station's strong market position in Las Vegas, as well as the company's favorable growth prospects and the rapid growth of the Las Vegas Valley.

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