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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Affinity Gaming debt plan leads to rating boost

2 May 2012

A bond rating service on Tuesday gave its blessing to plans by Affinity Gaming to raise more than $200 million in new debt that would pay down existing loans.

The Las Vegas-based casino operator, which owns the three Primm resorts and the off-Strip Terrible's, wants to use the money to extend its debt maturity by five years to 2020.

Moody's Investors Service boosted its view of Affinity to "positive" from "stable."

Affinity, formerly known as Herbst Gaming, recently completed an asset swap with Golden Gaming in which it traded a slot machine route division and casinos in Pahrump for Golden's three casinos in Colorado. Affinity also sold its slot machine route operations covering the Terrible Herbst's convenience stores and a casino in Searchlight to the company founded by the Herbst family.

Once state gaming regulators approve the sale of the Colorado casinos, Affinity will own 15 casinos in four states, including nine in Nevada, two in Missouri and one in Iowa.

Moody's said its revision took into account Affinity's improved cost structure from the sale of "its relatively low margin route operations" and from previous cost-cutting efforts.

"Moody's expects a lower cost of debt capital and more relaxed debt maturity profile assuming the proposed debt refinancing transaction closes as planned," analyst Keith Foley said in a report.

"The outlook revision also reflects the expected benefits to Affinity with respect to the company's geographic diversification and earnings quality if (or) when the company receives its license to operate the Colorado casinos," Foley said.

Affinity was formed following the bankruptcy of Herbst Gaming, which reduced the company's debt from $1.1 billion to $350 million. The founding Herbst family lost control of the company through the reorganization.

Also, on Monday Affinity postponed its 2012 annual meeting, which was set for May 11. The company said it wanted more time to consider matters that it may present to shareholders.