KEY RATING DRIVERS:
The 'BB' IDR reflects the strong financial flexibility of
Calendar 2013 and calendar fourth quarter 2013 EBITDA increased by 3% and 9%, respectively, showing solid revenue flow-through. Fitch expects low-to mid-single digit revenue and EBITDA growth for fiscal year ending
Liquidity and Financial Flexibility
Cash at the enterprise level remains well in excess of the amount needed for day-to-day operating purposes including casino cage cash, and the enterprises typically generate positive free cash flow after accounting for capital expenditures and transfers to the tribal government (2013 was an exception given remodelling-related capital expenditures). In contrast, many Native American gaming credits exhibit free cash flow close to zero after transfers to tribal government.
There are no bullet maturities within
The one notch differential on the revenue bonds from the IDR takes into account a senior security interest in the enterprises' net revenues and certain tax revenue of the tribe. The pledged revenues are subject to a trustee directed flow of funds if debt service coverage by EBITDA and pledged taxes is less than 2.0x. In addition, should debt service coverage dip below 2.0x, distribution to the tribe is restricted to an amount necessary to meet the essential government services budget. Further supporting the rating is the Pueblo's limited ability to incur additional pari passu debt, which is limited by the bonds' covenants to
Increased disclosure with respect to the tribe's financial profile and policies could potentially result in positive rating pressure although the IDR is largely capped in the 'BB' category given the business risk associated with operating a single site facility in a competitive market.
--Increase in leverage to 2x or above, likely as a result of a debt funded expansion; and/or
--Sharp operating pressure stemming from a recession and/or intensifying competitive pressure such that leverage starts to approach 2x and/or the tribe is required to use the enterprises' cash on hand to supplement distributions.
Fitch affirms Pueblo of
--IDR at 'BB';
--Enterprise revenue bonds at 'BB+'.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology', (
--'2014 Outlook: U.S. Gaming (Deleveraging Potential)', (
--'Native American Gaming Insights -- Default and Recovery Study: Mohegan the Latest Restructuring', (
--'Native American Gaming Insights -- Off-Reservation Gaming: Three Years into the
--'Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers', (
2014 Outlook: U.S. Gaming (Deleveraging Potential)
Native American Gaming Insights -- Default and Recovery Study: Mohegan the Latest Restructuring
Native American Gaming Insights -- Off-Reservation Gaming: Three Years into the
Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Alex Bumazhny, CFA, +1 212-908-9179
Source: Fitch Ratings
Most Popular Stories
- Obama, Ukraine Discuss Russian Incursion in Crimea
- Chinese May Have Spotted Malaysia Airlines Debris
- Social Media Causee Sleep Deprivation in Students
- First-time Jobless Claims Drop Unexpectedly
- Banks Buying Little From Minority Firms: Study
- General Electric Plans IPO of Credit Card Unit
- 'Candy Crush' Maker Files IPO
- First-time U.S. Jobless Claims Hit 3-month Low
- SXSW Crash Kills 2, Injures 23
- U.S. Business Inventories Up, Retail Sales Down