Cannery Casino Resorts saw its debt downgraded on Thursday by Moody’s Investors Service, which gave the company a negative outlook due to an anticipation of continued weak operating performance and concerns about near-term covenant compliance.
The company said it had $575 million in debt at the end of August.
The company’s corporate family rating and probability of default ratings were moved to Caa1, reflecting substantial risk, from B2, or highly speculative.
“Moody’s primary concern is that Cannery will need to seek covenant relief at a time when operating conditions remain challenged,” Moody’s senior credit officer Peggy Holloway wrote in an investors note.
A debt restructure could reduce the company's cash flow by increasing interest rates on debt.
The downgrade also reflects a slower than expected ramp-up at Cannery’s two new casino facilities, Holloway said.
The $250 million Eastside Cannery on Boulder Highway was opened in August 2008. The company opened a permanent Meadows racino outside Pittsburgh in April.
The racino started strong the first six months, but cash flow slowed in September and October, placing it behind original expectations, Holloway said.
Additionally the company’s Las Vegas neighborhood casinos — which include the Cannery in North Las Vegas and the Rampart Casino at the JW Marriott at Summerlin — are operating well below expectations and will continue to struggle for the foreseeable future, Holloway said.
Cannery’s current debt load matures between 2012 and 2014. The company, which is privately owned, generates nearly $490 million in annual revenue, Moody’s said.
Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.
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