Boyd Gaming’s Casino Shopping Spree Has Credit Repercussions

Posted on January 16, 2018 - Last Updated on April 4, 2019

Is Las Vegas, Nevada’s Boyd Gaming Corporation spreading itself a little too thin? It did acquire five new casino properties across the country last month.

Now, investment research and rankings company Moody’s Investors Service is suggesting it may be.

Moody’s revised Boyd Gaming’s ratings outlook to stable from positive a day after the company announced it signed an agreement to acquire Valley Forge Casino Resort in Pennsylvania. The acquisition represented Boyd’s fifth new casino property purchased in less than a week in December.

Boyd Gaming’s debt to earnings ratio

Moody’s Senior Vice President Keith Foley said in a press release the company’s diminished ability to pay off its incurred debt as a result of the recent acquisitions prompted the ratings downgrade.

“In light of Boyd’s recent announcements that it agreed to buy five regional casino properties for total consideration of about $856 million, Moody’s is of the view that Boyd will no longer be able to achieve and maintain debt/EBITDA at/below the 5.25 times upgrade target within a time frame necessary to achieve a higher rating.”

Debt/EBITDA is a measure of a company’s ability to pay off its debt. A high debt/EBITDA ratio suggests a company may have some difficulty servicing its debt and often results in a lower credit rating.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It represents a company’s earnings or income.

The week before Christmas, Pennsylvania’s own Penn National Gaming announced it is buying competitor Pinnacle Entertainment Inc. in a $2.8 billion cash-and-stock deal. In order to meet regulatory requirements, Penn National is selling four existing Pinnacle casino properties to Boyd Gaming for $575 million.

The casinos are:

  • Ameristar Kansas City
  • Ameristar St. Charles
  • Belterra Park
  • Belterra Casino Resort

Just days later, Boyd Gaming announced it had also entered into an agreement to acquire Valley Forge Casino Resort in King of Prussia, PA for $280.5 million.

Boyd Gaming expands across the country

The acquisitions will bring the Las Vegas, Nevada-based Boyd Gaming’s casino portfolio up to 29 properties operating across 10 states.

According to Moody’s, Boyd’s debt/EBITDA ratio was 5.6 times prior to the acquisitions. Following the announcement of the recent acquisitions, that number rose to 5.8 times. Moody’s claims that still sits comfortably below the 6.0 times debt/EBITDA downward rating trigger. However, moving Boyd’s ratings outlook from positive to stable was still necessary.

Regardless, Moody’s maintains the acquisitions will have some positive effects as well.

Moody’s expects Boyd’s leverage will begin to drop over the next 12 to 18 months as it applies free cash flow towards debt reduction. Foley also said Boyd’s credit rating could improve at some point:

“From a strategic point of view, however, there is a credit positive element to the these acquisitions in that they are consistent with Boyd’s geographic diversification plans, something Moody’s believes will be beneficial to the company over the longer-term, both in terms of the company’s overall credit profile, competitive position, and possibly ratings at some point in the future.”

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Marty Derbyshire

Martin Derbyshire has more than ten years of experience reporting on the poker, online gambling, and land-based casino industries for a variety of publications including Bluff Magazine, PokerNews, and PokerListings. He has traveled extensively, attending tournaments and interviewing major players in the gambling world.

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