Wynn, Fountainebleau, Riviera bond ratings cut

LAS VEGAS, Nevada -- Moody's Investors Service downgraded the bond ratings of three more casino operators Friday and placed a fourth on review, the day after taking action on four casino operators covering more than $38.3 billion in publicly held debt.

Declining gaming revenues in Las Vegas were the driving force for Moody's revising its bond ratings on the industry. Gaming revenues on the Strip are down 5.4 percent for the first five months of the year and the service believes weak results could continue.

Moody's changed the ratings outlook on Wynn Resorts Ltd., Fountainebleau and Riviera Holdings to "negative" from "stable" while Boyd Gaming Corp. was told its bonds were on review for a possible downgrade. The changes and review for the four companies covers more than $6.3 billion in public debt.

Wynn had the largest amount of debt affected by the ratings change, $2.7 billion. In addition to the Las Vegas gaming revenue issues, Moody's said the negative outlook toward Wynn acknowledged the company's "aggressive financial policy" and also took into account the unveiling later this year of the $2.2 billion Encore at Wynn Las Vegas, "which could open in a less than favorable operating environment."

Moody's is concerned the $2.4 billion in public debt that is helping finance the under-construction $2.9 billion Fountainebleau could face some challenges when it opens in 2010.

"The change in rating outlook reflects slowing demand for condo-hotel units, particularly in the Las Vegas market where the real estate market is under significant stress," Moody's said in a statement. "Sale of condo-hotel units at originally projected levels is necessary to bring peak construction leverage down to a serviceable level."

Riviera has $245 million in debt that was changed to negative. In addition to Las Vegas, Moody's expressed concern that results from the company's Black Hawk, Colo., casino could be hurt by a statewide smoking ban.

Moody's review of Boyd Gaming's $990 million in public debt concerns the decline in gaming revenues in both the Las Vegas locals market and downtown, where the company operates three casinos. Also, Moody's expressed concern that Boyd Gaming's Blue Chip casino in Indiana will lose business because of competition from a neighboring American Indian casino.

The ratings service said development and financial plans related to Boyd Gaming's under-construction $4.8 billion Echelon development will also influence its rating decision.

On Thursday, Moody's downgraded Harrah's Entertainment and Station Casinos, and put MGM Mirage and Las Vegas Sands on notice that their bonds were on review for a possible downgrade.