Moody’s rates Penn National loans Ba2

Moody's Investors Service said it confirmed the Ba3 corporate family ratings for both Penn National Gaming, Inc. and Pinnacle Entertainment, Inc.

Both companies were placed under review for downgrade on Dec. 19, 2017 following the announcement that Penn will acquire Pinnacle in a cash and stock transaction valued at about $2.8 billion.

The transaction is expected to close early in the fourth quarter of this year.

Penn's and Pinnacle's Ba2 senior secured and B2 senior unsecured ratings were also confirmed.

Additionally, Moody's assigned a Ba2 (LGD3) to Penn's proposed $430 million term loan A add-on due 2023 and new $820 million term loan B due 2025.

"Since the merger announcement was made and review for downgrade was initiated, EBITDA growth and debt reduction at Penn and Pinnacle since then along with a Moody's projected free cash flow expectation of the combined entity, will enable Penn to achieve and maintain debt/EBITDA of about 5.7 times in fiscal 2019, and 5.5 times in fiscal 2020," Keith Foley, senior vice president at Moody's, said in a news release.

"Moody's projected leverage for the combined entity, along with the expectation that Penn will maintain debt/EBITDA at or near the 5.5 times level, helps support our decision to confirm the ratings.”

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