Poster Financial debt rated by S&P

Monday, Nov. 10, 2003 | 11:03 a.m.

Standard & Poor's Ratings Services has assigned a "B" rating to $140 million in senior secured notes due 2011 proposed by a Las Vegas company that intends to purchase the Golden Nugget hotel-casinos in Las Vegas and Laughlin from MGM MIRAGE.

In June, Poster Financial Group Inc. announced a $215 million acquisition of both properties. The deal is expected to close by March.

S&P also assigned a "B" corporate credit and "B+" ratings to the company's proposed $20 million five-year term loan and $15 million five-year revolving credit line. The bank loan is rated one notch above the corporate credit rating "reflecting the very strong likelihood of full recovery of principal under a default or bankruptcy scenario," S&P analyst Peggy Hwan said. The outlook of the company is stable.

The ratings are a few notches below investment grade, reflecting the fact that the loans are more vulnerable than investment grade debt but that the company currently has the capacity to meet its financial commitments.

The ratings reflect Poster Financial's "primarily reliance on a single property in a mature gaming market for a majority of its cash flows, high debt levels and a relatively small cash flow base," Hwan said. "These factors are tempered by the good quality property in downtown Las Vegas, which has been recently refurbished."

Part of the proceeds from the debt issuance, along with the company's $15 million in private notes and $50 million in cash equity, will be used to finance the purchases. The remainder will be used to fund working capital and for fees and expenses associated with the transactions.

The company is expected to have about $175 million in total consolidated debt outstanding, including the $15 million in private notes issued by PB Gaming, the holding company parent of Poster Financial Group.