S&P rates Pinnacle Entertainment facility B+

Standard & Poor's said it assigned its B+ rating to Pinnacle Entertainment Inc.'s proposed $290 million senior secured bank facility.

Proceeds from the new bank facility will be used to refinance the company's existing credit facilities, to help provide funding for several of the company's planned capital investments, including the Lake Charles development project and the Belterra expansion, and for general corporate purposes.

The bank loan is rated one notch above the corporate credit rating, reflecting the very strong likelihood of full recovery of principal under a default or bankruptcy scenario. Concurrently, S&P said it affirmed its B corporate credit and CCC+ subordinated debt ratings.

S&P said the ratings reflect the company's relatively small portfolio of casino properties that are not generally market leaders, high debt leverage, the expected increase in near-term growth-oriented capital spending, and construction and start-up risks associated with its Lake Charles development project.

These factors are somewhat offset by steady same-store operating results, minimal near-term maturities, and adequate current liquidity.

Total EBITDA for the 12 months ended Sept. 30 improved to about $89.4 million due to improved performance at Belterra and Bossier City, in conjunction with aggressive cost controls. Still, based on current operating trends, borrowings associated with planned capital spending, and pro forma for the proposed bank facility, credit statistics are weak for the rating with EBITDA coverage of interest expense and total debt to EBITDA at less than 2x and more than 7x, respectively, for 2003.

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