Although Motor City Casino recently opened its new casino facility, the Ilitch owned holding company (CCM Merger, Inc.) continues to be leveraged beyond its B1 "corporate credit and probability of default rating" which gives analysts continued cause to maintain the negative outlook originally assigned one year ago.
Global Credit ResearchAnnouncement
8.29.07
New York -- Moody's affirmed CCM Merger, Inc.'s (CCM") ratings and negative outlook. CCM has a B1 corporate family and probability of default rating, a Ba3 (LGD-3, 35%) senior secured bank loan rating, and B3 (LGD-5, 88%) unsecured senior note rating.
The negative outlook considers that although the company recently opened the casino portion of its $300 million expansion project and reported second quarter 2007 performance in terms of market share and revenue growth, leverage at this point is still higher then what was expected when the initial rating was assigned in July 2005. The negative outlook was assigned in July 2006 in response to CCM's lower than expected operating results which highlighted its vulnerability to aggressive promotional activity by its two primary competitors despite the historical strength and positive long-term outlook for the Detroit gaming market. CCM's ratings could be lowered in the next 6-months if the recent opening of its expanded casino and the new hotel scheduled to open this November do not have enough of a positive impact to enable the company to reduce leverage to at or below 5.5x over the next two years, a level considered more appropriate for a B1 corporate family rating with CCM's asset profile.
The B1 corporate family rating continues to acknowledge the favorable demographics, population density and limited competition that characterize the Detroit gaming market, and that the MotorCity Casino is one of only three commercial casinos that are permitted to operate in Detroit.
Moody's prior rating action on CCM occurred on Sep. 28, 2006 when probability of default ratings and loss given default assessments were assigned to the company as part of the general roll-out of the loss given default product.
CCM Merger, Inc. is a holding company whose primary operating subsidiary is Detroit Entertainment, LLC doing business as MotorCity Casino. All revenues and operating cash flows are derived from this subsidiary. The company does not publicly disclose financial data.
New York
Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Keith Foley
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
http://www.moodys.com/moodys/cust/research/MDCdocs/29/2006800000450280.asp?doc_id=2006800000450280&frameOfRef=corporate&namedEntity=Announcement
The negative outlook considers that although the company recently opened the casino portion of its $300 million expansion project and reported second quarter 2007 performance in terms of market share and revenue growth, leverage at this point is still higher then what was expected when the initial rating was assigned in July 2005. The negative outlook was assigned in July 2006 in response to CCM's lower than expected operating results which highlighted its vulnerability to aggressive promotional activity by its two primary competitors despite the historical strength and positive long-term outlook for the Detroit gaming market. CCM's ratings could be lowered in the next 6-months if the recent opening of its expanded casino and the new hotel scheduled to open this November do not have enough of a positive impact to enable the company to reduce leverage to at or below 5.5x over the next two years, a level considered more appropriate for a B1 corporate family rating with CCM's asset profile.
The B1 corporate family rating continues to acknowledge the favorable demographics, population density and limited competition that characterize the Detroit gaming market, and that the MotorCity Casino is one of only three commercial casinos that are permitted to operate in Detroit.
Moody's prior rating action on CCM occurred on Sep. 28, 2006 when probability of default ratings and loss given default assessments were assigned to the company as part of the general roll-out of the loss given default product.
CCM Merger, Inc. is a holding company whose primary operating subsidiary is Detroit Entertainment, LLC doing business as MotorCity Casino. All revenues and operating cash flows are derived from this subsidiary. The company does not publicly disclose financial data.
New York
Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Keith Foley
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
http://www.moodys.com/moodys/cust/research/MDCdocs/29/2006800000450280.asp?doc_id=2006800000450280&frameOfRef=corporate&namedEntity=Announcement
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