Moody's cuts Circus and Eldorado

Moody's Investors Service said it downgraded Circus and Eldorado Joint Venture's corporate family and probability of default rating to B3 from B2, and upgraded its speculative grade liquidity rating to SGL-3 from SGL-4. The agency lowered the $160 million senior secured mortgage notes due 2012 to B3 (LGD3, 48%) from B2 (LGD4, 52%).

The outlook is negative.

The downgrade reflects Circus and Eldorado's greater than anticipated decline in earnings, increasing leverage and a reliance on cash balances to fund cash short-falls as the company has no access to its revolving credit facility, according to the agency.

As a result, debt-to-EBITDA ratio rose to 6.1 times at Sept. 30 and is expected to rise further given the weak outlook for gaming demand.

The B3 corporate family rating anticipates that Circus and Eldorado will be able, on an annual basis, to cover interest, tax disbursements to its partners, working capital investments and capital expenditures in 2009 from internally generated cash flow, the agency said.

The upgrade to the speculative grade liquidity rating reflects expectation that on an annual basis, the company's internally generated cash will be sufficient to cover its fixed charges in 2009, and cash balances will be more than sufficient to cover seasonal needs, the agency noted.

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