S&P: Mohegan Tribal Gaming Authority 'B-' Issuer Credit Rating Placed On CreditWatch Positive; New Debt Rated
At the same time, we assigned our 'B' issue-level rating to MTGA's proposed $1.4 billion senior secured credit facility, which will consist of a revolver, term loan A, and term loan B.
S&P Global Ratings does not assign recovery ratings to Native American debt issues because there are sufficient uncertainties surrounding the exercise of creditor rights against a sovereign nation. These include whether the U. S. Bankruptcy Code would apply, whether a U. S. court would ultimately be the appropriate venue to settle such a matter, and to what extent a creditor would be able to enforce any judgment against the sovereign nation. The notching of our issue-level ratings from our issuer credit rating on a given Native American issuer reflects the relative position of each security in the capital structure, incorporating the amount of higher ranking priority debt ahead of each issue. MTGA's senior secured credit facility is the highest ranking debt in its capital structure. As a result, the 'B' issue-level rating assigned to the debt reflects the expected issuer credit rating on MTGA following the completion of the proposed refinancing transaction.
MTGA plans to use proceeds from the new credit facilities to refinance existing debt, including its existing revolving credit facility and term loan facility.
"The CreditWatch listing reflects our expectation that, if the proposed refinancing transaction closes as expected, we will raise our issuer credit rating on MTGA one notch to 'B' from 'B-'," said S&P Global Ratings credit analyst Ariel Silverberg.
The proposed refinancing transaction will eliminate intermediate-term refinancing risk given approximately $883 million of debt (which represents 52% of total debt outstanding as of June 30, 2016), including MTGA's existing senior secured credit facilities, matures by the end of 2018. In addition, we expect the proposed refinancing transaction will improve EBITDA coverage of interest and cash flow generation, allowing MTGA to continue to repay debt and build in cushion in its leverage profile to absorb the impact of new competition. We believe that MTGA's long run cash flow generation and credit measures, particularly EBITDA coverage of interest, will not deteriorate to a point where we are concerned with MTGA's ability to service its debt and sustain its capital structure.
We expect to resolve the CreditWatch listing upon execution of the proposed refinancing transaction and raise our issuer credit rating one notch to 'B' from 'B-' if the refinancing transaction is completed as outlined, reflecting our forecast for discretionary cash flow generation to remain positive, and for EBITDA coverage of interest to remain in the high-1x area over the long run.