More gaming industry debt faces possible downgrades

Friday, Oct. 5, 2001 | 9:39 a.m.

Moody's Investors Service placed three more Las Vegas gaming companies on watch for a possible downgrade in credit ratings.

Moody's confirmed the credit ratings of Alliance Gaming Corp., Mikohn Gaming Corp. and Herbst Gaming Inc., but revised the outlook of all three from stable to negative. A negative outlook raises the possibility of future downgrades in credit ratings -- which makes it more difficult and more expensive for companies to take on debt.

Alliance and Mikohn are primarily gaming equipment manufacturers. Moody's said the negative outlook reflects the possibility that casino operators could cancel or delay orders for new slot machines in a slowing tourism economy.

"Both companies ... are highly dependent on the ability and willingess of gaming operators to both purchase new gaming products and upgrade existing products," the Moody's report said.

International Game Technology, the largest slot machine manufacturer, was assigned a negative outlook by Moody's last week.

Herbst Gaming is the privately held owner and operator of the Terrible's hotel-casino on Paradise Road.

The company's negative outlook "reflect(s) the company's significant dependence on the Las Vegas locals market and its small size compared to its two largest competitors, Station Casinos Inc. and Coast (Resorts)," the Moody's report said.

Station's outlook had been revised to negative prior to the Sept. 11 attacks; Moody's has not yet taken any action on Coast's ratings.

Separately, Standard & Poor's assigned a "D" rating to Aladdin Gaming Holdings, the lowest credit rating given by the agency. The move follows the Chapter 11 bankruptcy filing of the Aladdin on Sept. 28.

A "D" rating is assigned to companies in credit default. The company had held a "CCC-" corporate credit rating, a "CC" senior unsecured debt rating, and a "CC" rating on its junk bonds.

Virtually every major Las Vegas gaming company is under review for possible credit downgrades, while credit agencies study the expected impact of the tourism slowdown on their businesses. Businesses that have been placed on review for possible downgrade by at least one major agency include MGM MIRAGE, Park Place Entertainment Corp., Mandalay Resort Group, Harrah's Entertainment Inc., Boyd Gaming Corp. and Las Vegas Sands Inc.

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