Standard & Poor's Ratings Services today lowered its corporate credit and issue-level ratings on Atlantic City-based Trump Entertainment Resorts Holdings L.P. (TER).
The corporate credit rating was lowered to 'CCC' from 'B-', and the rating outlook is negative.
Ben Bubeck
"The ratings downgrade reflects our expectation that TER's ability to service its current capital structure over the intermediate term will be challenged despite the recent opening of the Chairman Tower at the Trump Taj Mahal and the planned sale of the Trump Marina," said Standard & Poor's credit analyst Ben Bubeck.
"While a portion of the proceeds from the planned sale of the Trump Marina, which is scheduled to close by May 28, 2009 (subject to up to a potential 60-day extension), could potentially remain on the balance sheet to support an expected shortfall in cash generation relative to debt service obligations, we believe that, absent a substantial rebound in the Atlantic City market, a restructuring of TER's debt obligations is likely," Bubeck says.
The 'CCC' rating reflects TER's weak credit metrics, limited liquidity, and small portfolio of casino assets, which rely exclusively on cash generated in the highly competitive Atlantic City market.
During the 10 months ended Oct. 31, 2008, total casino win in the Atlantic City market and at TER's three properties was down 6.6% and 6.7%, respectively, versus the prior comparable period, according to the S&P analysis.
"We expect that competitive pressures from neighboring states, compounded by challenging economic conditions and a substantial pullback in consumer discretionary spending, will continue to hurt the performance of the Atlantic City market in general, and will drive TER's credit metrics even weaker over the next several quarters," estimates Bubeck.As of Sept. 30, 2008, he figures that, including the Trump Marina, total debt to EBITDA was more than 14x and EBITDA coverage of interest was approximately 0.9x.
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