While the casino industry is hot with news about a potential acquisition of Harrah's Entertainment for more than $15 billion, Lehman Brothers and Bear Stearns are going out to existing lenders for an add-on loan for Pinnacle Entertainment. The $250 million addition consists of a $50 million revolver and a $200 million term loan. It is being tacked-on to an existing $750 million credit facility put in place last November, according to a banker. The add-on will be used to continue to fund two St. Louis-based projects.
Pricing on both tranches remains the same as the original deal with the term loan priced at LIBOR plus 2% and the revolver priced at LIBOR plus 2 1/4%. Pinnacle also plans to amend certain covenants in its credit agreement to improve overall financial flexibility, but these changes could not be determined by press time.
The existing part of the deal was used to refinance $380 million of existing debt and allow for capital expenditures for the company's St. Louis-based area casino projects, slated to open in 2008. That financing includes: a $450 million revolver, a $200 million term loan "B" and a $100 million delayed-draw term loan, which was also priced at LIBOR plus 2 1/4% (CIN, 11/11). The facility also includes a greenshoe provision, offering the potential to increase the facility's size to $1 billion, according to a release.
Standard & Poor's affirmed the Las Vegas-based casino operator's BB- rating and 1 recovery rating. The add-on facility will be used for general corporate purposes and to improve overall financial flexibility. The two projects, currently being referred to as "City" and "County," are slated to open in the fall of 2007 and 2008, respectively, according to a company spokeswoman. Steve Capp, cfo, was traveling and could not be reached for comment.
Pinnacle's 8 3/4% '13 bonds were down about a point to 105 3/8. Other casinos' debt was affected by Harrah's proposed leverage buyout. MGM Mirage's five-year credit default swaps widened 15-20 basis points to 185-195 and its 6 7/8% '16 bonds dropped a point to 96 3/4 on concerns it too could become an LBO target. Isle of Capri Casinos' bonds did a little better; its 7% '14 bonds moved up a point to 96 3/4. A dealer explained that the bonds contain a 101 change of control provision, which would be triggered if it was taken out in a LBO deal. Calls to James Murren, cfo of Mirage, and Donn Mitchell, senior v.p. at Isle of Capri, were not returned.