Moody's Investors Service has placed Station Casino's ratings on review for possible downgrade, affecting $1.4 billion of debt, including a $300 million credit facility rated Ba1. The potential downgrade is due to leverage concerns and a planned share repurchase agreement of 10 million shares at a cost of approximately $125 million. However, Moody's also noted that Station is one of two dominant players in the Las Vegas locals market and that Las Vegas is one of the fastest growing markets in the U.S.
Originally Moody's anticipated that Station would reduce debt levels following the renovation of the Fiesta Casino and Reserve Casino properties acquired in January 2000. But, a slowing economy, increased competition and the share repurchase program will probably keep leverage over four times debt-to-EBITDA through 2002 and debt-to-EBITDA is expected to be five times at the end of this year. The Fiesta is taking longer than expected to ramp-up and the company expects tough conditions to continue through the rest of the year.
* Pittsburgh-based WESCO Distribution's revolving credit facility has been downgraded a notch from Ba2 to Ba3 reflecting lower sales and profits, brought about by the weaker U.S. economy and particularly by weaker demand from WESCO's industrial and automated control customers. WESCO is a provider of electrical products and other industrial MRO supplies. The rating is supported though by the company's extensive distribution network and diversified customer base. Customers include Chevron, Cargill and Goodyear. The company's revolver commitment has been reduced to $285 million from $379 million and will be further reduced quarterly to $185 million at maturity in 2004.
* Moody's has lowered the debt ratings of Minneapolis-basedTower Automotive, and its subsidiary R.J. Tower, from Ba2 to Ba3, affecting $1.15 billion of senior unsecured bank credit facilities. Tower produces assemblies and modules for automotive manufacturers. The downgrade is due to the company's significantly weakened performance, marked deterioration of credit protection measures and currently limited ability to use the revolver due to financial covenants.
The developments are due to a convergence of factors; an unfavorable market, a $35 million restructuring charge and an unusually large investment need associated with a record number of product launches. Moody's has concerns over Tower's strong reliance on the new products, all of which face potentially stiff competition from an increased level of product offerings by foreign competitors. Tower may also be affected by the success of the Ford Explorer, given the delayed launch and the damage to the Explorer's reputation, from the Firestone tire recalls, accoerding to a Moody's report.