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Moody’s downgrades debt rating of Stratosphere owner
Tuesday, Aug. 31, 2010 | 4:01 p.m.
The Stratosphere is seen Monday, December 21, 2009.
Sun Coverage
Disappointing financial results by the owner of the Stratosphere hotel-casino in Las Vegas resulted in a debt rating outlook downgrade today.
Moody's Investors Service, acting on about $375 million of debt, today lowered its rating outlook for American Casino & Entertainment Properties to negative from stable.
"The change in rating outlook reflects worse than expected operating results through the second quarter of 2010 that has caused credit metrics to deteriorate. Additionally, the operating environment on the Las Vegas
Strip and in the Las Vegas locals market remains under pressure due to capacity additions and lower spending on gaming by consumers," Moody’s said in its rating report.
"Thus, there is a higher probability that ACEP (American Casino) could have difficulty keeping (debt) leverage and interest coverage at levels appropriate for its current rating,'' Moody's said.
Moody’s noted the company's revenue concentration "in the depressed gaming markets in and around Las Vegas and capacity expansion on the Las Vegas Strip that has depressed room rates and hampered operators' ability to increase rates."
"Positive rating considerations include the company's good liquidity and Moody's expectation that ACEP can generate sufficient earnings to support interest and maintenance capital spending," the report said.
American Casino posted a second quarter loss Aug. 11 as it wrote down the value of the Stratosphere because of continued weak results associated with the recession and the city's over supply of hotel rooms.
The company, which also has two Arizona Charlie's hotel-casinos in Las Vegas and the Aquarius in Laughlin, reported a loss for the quarter of $7.7 million vs. a loss in the year-ago quarter of $844,000. Net revenue of $86.6 million was down 8 percent.
The Stratosphere suffered through decreases in occupancy, average daily room rate and overall spending by guests -- causing American Casino to post a $2 million non-cash impairment charge to Stratosphere's tradenames.
The news today from Moody’s wasn’t all bad: American Casino’s B3 corporate family rating, B3 probability of default rating, B3 senior secured note rating and SGL2 speculative grade liquidity rating were affirmed.
Discussion: 2 comments so far…
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The Sun
Locally owned and independent for more than 50 years.
However, we are still continuing with our upgrades. The Stratosphere "Selcet" floors are done, and the other rooms are getting rehabbed. A new, better, Stratosphere will emerge, hopefully not entered into bankruptcy.
Best of luck to ya Strato.I still hold a place in my heart for u when Bob Stupack knew how to shake out a fair deal for the customer.I saw more strange things happen in that place to people,mostley good.I still use those expieriences as antidotes today,slung out to others in conversations,about the amazing strikes I saw there.....to the other guy right next to me,every time!Hope those sort of dreams come true that I saw are still availible.Bob,you taught em,I hope their still listening?
P.S. I won't talk about Moodys" this time ,this time they did their job....sorry Strato,Call em' like u see em'.Turn this thing around,I want good things to happen to you too!
Isn't the Strat owned by a subsidiary of Goldman Sachs?
The strat was sold by Carl Ichan in Feb of 2008 for a profit of 1.3 billion.He sold it to Goldman Sachs right at the top of the market.Dont care for those money grubbers one bit.Wishing the best to keep the people working.Met some really nice folks over there.
I think the last time that place made money was when Bob Stupak marketed those $399 all inclusive vacation packages in the Sunday magazines across the nation and drew in a lot of folks and built loyalty with those promotions. The old Vegas World was a money maker despite it's less than desirable location. Stupak knew how to market and not try to be everything to everyone, he was quite the eccentric, but did a great job with that place, despite it being tired and outdated, even back in the 1980's. The losses really started when he built the tower, and they haven't recovered since then, through several ownerships. Remember when he wanted to have a big mechanical King Kong climbing up the tower?
I saw a guy there drunker than a skunk lay down some chips on the pass line,Some hot chick was on a great roll.The guy actually fell asleep,face in hands on the edge of the table.Long story short his wife later comes over and wakes him up.He had nearly 40 grand sittin there.Got it off the table in the nick of time.Next roll was a crapout!
The last time I was there was two years ago. One of my favorite palces to shoot craps (crapless table). On that evening the table was full, everyone having a great time ( $5.00 minimum ). The pit boss comes over and tells us with the next shooter the table minimum will be $10.00. No grandfather priviledge. That table emptied and I have not been back since. Those people just don't get it. Treat gamblers badly, we have a choice, and mine is never to go back to the Strat.
That would be interesting to see if debt holders foreclosed on Goldman Sachs dba American Casino & Entertainment!
No gbigs.Goldman bought 10% of Fuyao Group Glass Industries,who have half the glass production in China.When they first announced their intenions,Goldman could have bought their shares for 8 yuan at the time.They opened their mouth and today they are going for thirty something.Nothing like talking up the thing your going to buy.Wonder what their next scam is here!
ACEP is owned by a Goldman Sachs REIT named "whitehall", who purchased these 4 properties from Carl Icahn back in 2007 for 1.3 Billion, 900 Million or so of which was financed.
The "whitehall" family of REITs have had a dreadful track record of leveraged bets gone bad; at least one of them has lost a staggering 98% of its investors' capital! Last year, in an effort to keep some of these funds afloat, Goldman Sachs "ate" about 600 million of the debt, leaving the other 300 Million or so in bonds paying 11% interest (firmly in junk territory).
If Goldman had not "eaten" the debt (presumably for an equivalent equity stake), ACEP would be in chapter 11 by now.
I saw today that the sec did not prosecute moodys for their part in the mortgage meltdown. that the trouble - these clowns reek havoc and there is no consequence. Moody's is a joke and the laughing stock of the financial world the only trouble is there's no one else to preform the function on that scale.
There is also standard & poor,Fitch,etc.Moodys wanted to be indemnified {"Insured") by the gov. so they would take no losses or blame if incorrect in their assesments.You can't have your back covered and remain independent.They weren't ind. to start with.They are actually being paid by the Companies asking to be rated.Sorta like paying your teacher to tell u your grade.Neat arrangement ,huh?Nothing has changed in the reform bill on this either.Priority #1 reform was swept under the rug!
Burn;Those whitehall reits sounds more like they should have been called Whitewash!
agreed - they're all slime - There is no class so pitiably wretched as that which possesses money and nothing else.
I hate to say it Oh,but i think we have just wittnessed the greatest looting spree in the history of the entire world.No exagerration,and it is still ongoing.The piracy throughout the systems is eating us alive.Now these vultures are fighting over the spoilage and rot.And to the outrage of all,nobody is getting prosecuted for much of any of it.Prepare well,for they are circleing above us.Don't be their next meal!
you're right
Some really interesting comments here--I didn't know that Goldman Sachs owns the Strat, and this property hasn't exactly turned out to be a jewel. And roguerunner--the system is going to eat up this country. A new milestone has just been reached--people now owe more on their student loans than they do on their credit cards--and student loan debt is VERY TOXIC. I wonder how many suckers are majoring in debt at UNLV.