Moody's cuts Tropicana

Moody's Investors Service said it downgraded Tropicana Entertainment LLC's corporate family and probability-of-default ratings to B2 from B1 and its senior subordinated notes to Caa1 (LGD5, 84%) from B3 (LGD5, 85%).

The agency affirmed the company's first-lien term senior secured term loan and revolving credit ratings at Ba3 (LGD 2, 29% from LGD3, 31%) and assigned an SGL-3 rating.

The outlook is negative.

The downgrade reflects higher leverage, lower interest coverage and weaker liquidity than projected when ratings were initially assigned, Moody's said.

The SGL-3 rating reflects the company's ability to meet its debt service and maintenance capital requirements without material reliance on its revolving credit facility offset by the potential need to reset its covenants as well as the absence of unencumbered assets, Moody's said.

As of June 30, the issuer's debt-to-EBITDA ratio was 7.3 times and may exceed 8 times for calendar year 2007, according to the agency.

The outlook reflects the challenge of jump-starting revenue growth and meeting debt-to-EBITDA covenant, particularly, the step-down provision to 6.75 times in the first quarter of 2008, Moody's said.

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