Ilitch-owned Casino enterprise takes another credit rating hit; carrying very high default risk

On 1.16.09, Moody's dropped its credit rating for CCM Merger, Inc. a parent of Detroit's MotorCity Casino to "Caa1" from "B3." That was the second time in two months that Moody's knocked down the casino's credit score.

Here's how Moody's defines a "Caa" rating:

"Obligors rated Caa are judged to be of poor standing and are subject to very high default risk."

MotorCity Casino is carrying $1 billion of debt and a 7:1 Debt-to-EBITDA ratio; dangerously close to breaking lending convenants. Last week "investors" called on Mrs. Marian Ilitch, the casino's owner, to inject her own cash into the gambling establishment but instead Ilitch is seeking to lift various of its lending convenants.

It's also Moody's opinion that an additional equity contribution by CCM's owner may be needed in order for the company to obtain the required amendments. A $25 million contribution by CCM's owners of cash equity to repay debt was made in September 2008 that helped CCM meet its September 30, 2008 debt/EBITDA covenant.