Pinnacle Entertainment has completed a $240 million credit backing the construction of a casino-hotel project in Lake Charles, La. and additions at its Belterra Casino Resort in Indiana. The company had originally intended to complete an equity offering to fund the construction to keep leverage low, but after a fall off in the gaming market, pursuing an equity deal was not as favorable, explained Stephen Capp, Pinnacle's executive v.p. and cfo.
Bank of America and Bear Stearns lead the company's new deal. B of A led Pinnacle's old credit and Bear Stearns is new to the relationship. Capp was a managing director at Bear Stearns, where he focused on the U.S. leveraged finance market before joining Pinnacle in January. But the decision to go with Bear Stearns was made before Capp came on board. Capp said Daniel Lee, the company's ceo, chose Bear Stearns for the lead at the time the company was trying to put an equity deal together. He said tapping the bank debt market was appropriate because the company did not have any other senior debt and was able to secure the loan with its very broad, deep asset coverage. He also noted that Pinnacle is getting roughly 6% capital for its construction projects, which the company considers "pretty competitive."
The new bank deal comprises a $115 million, four-year revolver and a $125 million, five-year "B" term loan. The revolver was upsized by $5 million post-closing as the company sought to access the "good cheap capital" that was available, noted Capp. The revolver is priced at LIBOR plus 43/8% and the term loan carries a 45/8% spread over LIBOR. The facilities replace a $110 million revolver that was priced against a leverage-based grid. Pricing on the former revolver was approximately LIBOR plus 21/2% when the loan was taken out.