Alliance Gaming's bank debt dipped 1/2 point to trade at 99 on the firm's announcement that it had asked for more time to file its 10-K. The gaming company has asked the Securities and Exchange Commission for 15 extra days to file its financial report. The company is reviewing the timing of its revenue recognition and the accounting of reserves for uncollectible account receivable and inventory valuation, as well as the adequacy of its internal controls over financial reporting.
Moody's Investors Service downgraded Alliance's $75 million revolving credit facility to B1 from Ba3 and its $350 million term loan to B1 from Ba3 after the delay of the 10-K. Moody's noted that the company may have to restate certain quarterly results for 2005 and that this may cause it to violate its leverage ratio covenant. Keith Foley, senior credit officer at Moody's, said the firm has a minimum $25 million EBITDA requirement for the fourth quarter in its covenant agreement. But its credit agreement provides notice and cure provisions that would give Alliance until Nov. 4, to file financial statements.
The Moody's downgrade also takes into account the termination of a contract with the firm's distributor of video poker games for the Oklahoma market, which it expects will hurt its fiscal year 2005 revenue. Also, Hurricane Katrina has delayed the delivery of machines into the New Orleans and Gulf Coast gaming markets, and weakened the financial performance of Alliance's Mississippi casino property. Alliance did not return calls.