S&P rates Lowen Play notes B

Standard & Poor's said it assigned a preliminary B long-term corporate credit rating to Safari Holding GmbH, the owner of Lowen Play GmbH.

The outlook is stable.

The agency also said it assigned a preliminary B long-term issue rating to the €265 million proposed senior secured notes due 2021 to be issued by Safari Holding Verwaltungs GmbH. The preliminary recovery rating on the notes is 4, indicating 30% to 50% expected default recovery.

The ratings reflect a view of Lowen Play's weak business risk profile and aggressive financial risk profile, S&P said.

Lowen Play is among the largest operators of gaming arcades in Germany and currently offers about 8,500 coin-operated electronic gaming machines, the agency said.

The ratings also consider the company's earnings concentration in German gaming arcades, which face significant regulatory risk, S&P said.

Because Lowen Play is not present in other gaming products, it is particularly vulnerable to regulatory changes, the agency said.

The ratings also take into account the risk of increasing amusement taxes and changing consumer trends, S&P said.

These risks are partly moderated by the company's above-average profitability and healthy free cash flow generation, the agency added.

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