PA Meadows hit up Bank of America and Merrill Lynch for a $275 million credit facility last week. The deal consists of a $25 million revolver, a $180 million term loan and a $70 million second-lien term loan. Pricing on the first lien is LIBOR plus 3%, according to an investor. Pricing on the second lien could not be determined. PA Meadows is a racino, a racetrack with slot machines, based in Meadow Lands, Pa., in the Pittsburgh area.
The financing is being used to fund Millenium-Oaktree's July acquisition of The Meadows Racetrack from Magna Entertainment Corp. The shares were transferred in exchange for two notes representing the purchase price of the transaction in amounts of $175 million and $25 million. Payment of the notes was pending approval of a gaming license from the Pennsylvania Gaming Control Board, which was granted Sept. 27.
One investor commented that racinos are "tough credits." "There was one in Rhode Island and one in Yonkers they attracted a seedier clientele," he said. He went on to explain that the companies then tried to spend more money and revamp the facilities to attract a younger, cleaner crowd. "It's one of those 'build and they will come' type of scenarios and I usually don't finance those types of things cause you don't know if they will come."
Standard & Poor's rated the credit facility's first lien B with a recovery rating of 2 and the second lien CCC+ with a recovery rating of 5, citing its narrow business position as an operator of a single racino. Calls to Blake Tohana, cfo, were not returned by press time.