Revenue rises at struggling Greektown but Ilitch-owned MotorCity Casino sees declines again

According to various news accounts, the latest revenue results released by the Michigan Gaming Control Board (MGCB), indicate the overall gaming market in Detroit saw a 4.2% decline in May; however, Greektown Casino-Hotel appears to have bucked the trend for the fourth month in a row with a stunning 7.2% year-over-year revenue increase for the month. (At the time of this post, Data had yet to be posted to the MGCB web site.)

Greektown was the only Detroit casino to see an increase, while revenues at MGM Grand Detroit and MotorCity Casino dropped 10.9% and 3.6% respectively.

It should be noted that Greektown in particular has struggled financially in recent years and in May 2008 filed for bankruptcy protection. So, bragging rights about revenue growth at Greektown in May 2009 as compared to May 2008 should be tempered. May 2008 represented perhaps the lowest point in Greektown's financial health.

Despite a major renovation at MotorCity Casino including the addition off theaters, conference and restaurant amenities, and a 400-room luxury hotel, it has generally failed to meet financial expectations since Marian Ilitch acquired control of the property from MGM Mirage in 2005. Both Moody's and Standard & Poor's have now established a steady pattern of declining credit ratings for MotorCity's financial parent during this period.

Among numerous other affiliates, Ilitch controls CCM Merger, Inc. which is the highly leveraged financial parent of Detroit Entertainment LLC (DELLC) which is the entity that does business as (dba) MotorCity Casino. In December 2008, CCM Merger broke its financial convenants and as a result, investors demanded Marian Ilitch inject $45 million cash into the enterprise.

Financial results published by MGCB

To calm casino investors Ilitch forced to pony up $45 million cash injection

2.06.09

Motor City Adds More Equity; Deal Passes

An amendment for Motor City Casino passed last Tuesday after a game of tug-of-war between investors and the company. The two reached an agreement when Motor City parent company CCM Merger committed to a $45 million equity injection.

Deutsche Bank launched the amendment Jan. 13, and investors balked when the company asked for loosened leverage covenants but CCM, a vehicle of Detroit Red Wings owner Marian Ilitch, did not offer to put equity into the deal (CIN, 1/19). CCM then came back to investors with a $20 million equity injection offer.

"It was a non-starter," said one investor. "[The $45 million] is what got the deal done. Everything else was secondary to that."

The pricing on the facility was raised 300 basis points to LIBOR plus 5 1/2%, and a LIBOR floor of 3% was added.

A spokeswoman for the Detroit-based company declined comment, and a spokeswoman for Ilitch Holdings, the parent company of CCM did not return a call.

Ilitch issues press release indicating CCM Merger convinced enough investors to amend credit facility

CCM Merger Successfully Amends Credit Facility
DEUTSCHE BANK AG ORD SHS
DB 2/3/2009 11:43:00 AM

DETROIT, Feb 03, 2009 /PRNewswire via COMTEX News Network/ -- CCM Merger Inc, parent company of MotorCity Casino Hotel, announced today that it has reached an agreement with the required number of lenders for an amendment to its credit agreement. "We are very pleased to have completed this amendment under these most difficult market conditions," said Gregg Solomon, CEO of MotorCity Casino Hotel. "We appreciate the leadership of Deutsche Bank Trust Company Americas, as administrative agent, and the continued support of our entire lender group."

About MotorCity Casino Hotel

Located on Grand River at the Lodge Freeway (M-10), MotorCity Casino Hotel is owned by Marian Ilitch and is the only locally-owned and operated casino in Detroit. The entertainment complex has undergone a $325 million expansion project which includes a casino expansion, 400 room luxury hotel and spa, a new convention and banquet center, several new dining options, bars and lounges, a nightclub and an intimate live entertainment theater. For more information about MotorCity Casino Hotel, visit www.MotorCityCasinoHotel.com.

SOURCE: MotorCity Casino Hotel

To win investors' support for looser leverage covenants, Ilitch forced to sweeten the deal

1.31.09

Motor City Sweetens Terms

Motor City and lead Deutsche Bank have sweetened the terms on an amendment to loosen leverage covenants after investors balked. The spread was increased, and sponsor CCM Merger offered an equity injection into the company.

Investors were upset with the initial terms of the amendment, which was launched Jan. 13, because there was no equity input from CCM, which is owned by investor Marian Ilitch.

DB came back to the lenders with a $20 million paydown last Monday.

"The linchpin is just the equity injection," said one portfolio manager. "Some lenders are looking for higher pricing than that, and we're happy to ride the coattails."

The new terms also increase the price bump to 300 basis points, which would bring the total spread to LIBOR plus 5 1/2%. The LIBOR floor was also increased to 3% from 2 3/4%.

Calls to a company spokeswoman and Scott Fischer, CFO of Ilitch Holdings, the parent company of CCM, were not returned.

NOTE: investors rejected this $20 million cash injection proposal and ultimately demand a $45 million equity injection from Motor City Casino owner Marian Ilitch.

Moody's downgraded Credit Rating of MotorCity Casino's parent three times in ten months

Moody's Investor Service

Issuer: CCM Merger, Inc.
Long Term Corporate Family Credit Ratings History








Moody's has been forced to downgrade the Corporate Credit Ratings of CCM Merger, Inc., parent company of MotorCity Casino, three times in the last ten months. The ratings have slid from B1 t0 B2 to B3 to Caa1 all in less than a year.

Ilitch offers another $20M influx for MotorCity if investors will loosen up lending convenants

1.26.09

Red Wings’ Ilitch Offers More Cash to Appease MotorCity Lenders

By Pierre Paulden and Michael J. Moore

Jan. 26 (Bloomberg) -- Marian Ilitch, the owner of the National Hockey League’s Detroit Red Wings, offered to pump $20 million into her MotorCity Casino to obtain a loan amendment as gambling revenue falls.

Ilitch made the proposal after Credit Suisse AG’s asset management arm, Highland Capital Management LP and other investors asked her to invest more funds in the property because it’s at risk of violating terms of a $606 million loan, according to investors with knowledge of the situation. Lenders had threatened to raise the interest on the loan to 18 percent a year if she didn’t, said the investors, who declined to be identified because the talks are private.

MotorCity, owned by Ilitch’s closely held CCM Merger Inc., is a victim of the slump in Detroit, home to General Motors Corp. and Ford Motor Co., and the nationwide decline in gambling profits. Gaming revenue at the 400-room hotel and casino tumbled 7.1 percent in November and 11 percent in December from a year earlier, according to Moody’s Investors Service.

“If they don’t get the amendment, they could be in default,” said Keith Foley, a Moody’s analyst in New York. “The amendment is something that they need.”

CCM also offered to increase the interest rate on the loan to either 8.5 percent or 5.5 percentage points more than the London interbank offered rate, whichever is higher, according to the investors. In return, the company is seeking relaxed loan terms through the second quarter of 2011, after previously asking for covenant relief until the loan matures in July 2012. Standard & Poor’s LCD reported the offer earlier today.

Should CCM fail to reach an agreement, it may lose access to a $100 million credit line that it needs to pay a $50 million Economic Development Corp. bond in May, according to Foley. CCM already invested $25 million of equity in September, he said.

Falling Prices

The casino’s term loan due in 2012 was quoted at 42 cents on the dollar, according to a Jan. 20 report from Frankfurt- based Deutsche Bank AG. Its $300 million of 8 percent bonds due in 2013 trade at 55.6 cents on the dollar to yield 25 percent, according to prices compiled by Bloomberg.

“MotorCity Casino’s parent company is in the process of negotiating changes to its credit agreement to bring the financial covenants that were set in 2005 to levels consistent with those already in place for other gaming operators across the United States,” Jacci Woods, a MotorCity spokeswoman, said last week.

Woods declined to comment on details of the talks. Karen Cullen, a spokeswoman for Ilitch Holdings, didn’t return a call seeking comment today.

Declining Markets

Creditors are requiring increased rates from borrowers deemed high-yield, high-risk, and in jeopardy of breaking debt agreements after the so-called leveraged loan market lost 29 percent last year. Companies rated below Baa3 by Moody’s and BBB-by S&P are considered high-yield, or junk.

Borrowers paid an average 1.64 percentage points more in interest last year to amend borrowing agreements needed to avoid default, according to S&P’s LCD data as of September.

Ilitch, who was born in 1933 to Macedonian immigrant parents, is the wife of Michael Ilitch, the 79-year-old owner of Major League Baseball’s Detroit Tigers. The two co-founded closely held pizza chain Little Caesar Enterprises Inc.

CCM used the bonds and loans to buy the 75 percent stake in MotorCity in April 2005 that Ilitch didn’t already own from Las Vegas-based Mandalay Resort Group and other investors. MotorCity opened the hotel in November 2007, adding to the 75,000-square- foot casino.

Debt Burden

Debt rose to about 7 times earnings before interest, taxes, depreciation and amortization from 6.1 times in December as gambling revenue fell amid the economic slowdown, according to a Jan. 16 report by Foley. Terms of the loan require the ratio not exceed 6.1, and the limit will tighten to 5.9 times this quarter, he wrote in a December report.

Casinos across the U.S. are suffering as consumers cut spending in the recession. Revenue on the Las Vegas Strip, the biggest U.S. gambling center, slid 9.3 percent in the first 11 months of 2008 and was poised for its biggest annual drop since data started being compiled in the mid-1980s, the Nevada Gaming Control Board said. Casino revenue in Atlantic City, New Jersey, tumbled a record 19 percent in December, the New Jersey Casino Control Commission said.

Trump Entertainment Resorts Inc., founded by developer Donald Trump, is negotiating a debt restructuring after the Atlantic City, New Jersey-based casino owner skipped a $53 million interest payment that was due Dec. 1.

Detroit’s Declines

Detroit is facing more job losses than the rest of the country after U.S. auto sales tumbled 18 percent last year. Unemployment for the metropolitan area was 9.5 percent in November, up from 7.6 percent a year earlier, data compiled by the Bureau of Labor Statistics show. The national average was 6.7 percent that month.

U.S. automakers are also suffering as the car industry in Europe declines. New car registrations in the European Union fell 18.2 percent in December, according to a Jan. 15 report from the European Automobile Manufacturers Association in Brussels.

“Historically, even with the high unemployment rate, Detroit had done okay on a relative sense,” Foley said. “But November and December numbers, there was a sharp drop-off.”

Deutsche Bank, which arranged the MotorCity loan in 2005, proposed Jan. 13 that CCM increase interest payments to a minimum of 7.75 percent or 5 percentage points more than Libor when Libor exceeds 2.75 percent. CCM currently pays 2 percentage points more than Libor, which ended last week at 1.17 percent.

Increasing Ratios

CCM offered to pay a fee of 50 basis points to lenders if they agreed to the change, according to S&P’s LCD, which reported the proposal earlier this month. A basis point is 0.01 percentage point. In exchange, the debt-to-earnings ratio would be increased to 8 times, S&P’s LCD said, without saying where it got the information.

A majority of the investors rejected the offer and asked Ilitch to inject additional cash into the casino, said the investors, who declined to be identified.

Dallas-based Highland, Credit Suisse of Zurich and other lenders said that without more equity, Ilitch must pay annual interest of 18 percent or 15 percentage points more than Libor, whichever is higher, according to the investors. The interest would be split between cash and payment-in-kind, they said.

Credit Suisse spokeswoman Suzanne Fleming, Highland partner Jack Yang and Deutsche Bank spokesman Scott Helfman declined to comment.

To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net ; Michael J. Moore in New York at mmoore55@bloomberg.net.

MotorCity Lenders Call on Red Wings’ owner Ilitch for Cash

1.26.09

By Pierre Paulden and Michael J. Moore

Jan. 26 (Bloomberg) -- Marian Ilitch, the owner of the National Hockey League’s Detroit Red Wings, is facing calls from lenders to pump more money into her MotorCity Casino or pay an almost sixfold increase in interest as gambling revenue falls.

Credit Suisse AG’s asset management arm, Highland Capital Management LP and other investors told Ilitch to boost capital in the property because it’s at risk of violating terms of a $606 million loan, according to investors with knowledge of the situation. If she doesn’t, lenders may raise the interest on the loan to 18 percent a year, said the investors, who declined to be identified because the talks are private.

MotorCity, owned by Ilitch’s closely held CCM Merger Inc., is a victim of the slump in Detroit, home to General Motors Corp. and Ford Motor Co., and the nationwide decline in gambling profits. Gaming revenue at the 400-room hotel and casino tumbled 7.1 percent in November and 11 percent in December from a year earlier, according to Moody’s Investors Service.

“If they don’t get the amendment, they could be in default,” said Keith Foley, a Moody’s analyst in New York. “The amendment is something that they need.”

Should CCM fail to reach an agreement, it may lose access to a $100 million credit line that it needs to pay a $50 million Economic Development Corp. bond in May, according to Foley. CCM already invested $25 million of equity in September, he said.

Falling Prices

The casino’s term loan due in 2012 was quoted at 42 cents on the dollar, according to a Jan. 20 report from Frankfurt-based Deutsche Bank AG. Its $300 million of 8 percent bonds due in 2013 trade at 55.6 cents on the dollar to yield 25 percent, according to prices compiled by Bloomberg.

“MotorCity Casino’s parent company is in the process of negotiating changes to its credit agreement to bring the financial covenants that were set in 2005 to levels consistent with those already in place for other gaming operators across the United States,” said Jacci Woods, a MotorCity spokeswoman.

Woods declined to comment on details of the talks. Karen Cullen, a spokeswoman for Ilitch Holdings, referred questions to MotorCity.

Creditors are requiring increased rates from borrowers deemed high-yield, high-risk, and in jeopardy of breaking debt agreements after the so-called leveraged loan market lost 29 percent last year. Companies rated below Baa3 by Moody’s and BBB- by Standard & Poor’s are considered high-yield, or junk.

Borrowers paid an average 1.64 percentage points more in interest last year to amend borrowing agreements needed to avoid default, according to Standard & Poor’s LCD data as of September.

Tigers, Little Caesar

Ilitch, who was born in 1933 to Macedonian immigrant parents, is the wife of Michael Ilitch, the 79-year-old owner of Major League Baseball’s Detroit Tigers. The two co-founded closely held pizza chain Little Caesar Enterprises Inc.

CCM used the bonds and loans to buy the 75 percent stake in MotorCity in April 2005 that Ilitch didn’t already own from Las Vegas-based Mandalay Resort Group and other investors. MotorCity opened the hotel in November 2007, adding to the 75,000-square- foot casino.

Debt rose to about 7 times earnings before interest, taxes, depreciation and amortization from 6.1 times in December as gambling revenue fell amid the economic slowdown, according to a Jan. 16 report by Foley. Terms of the loan require the ratio not exceed 6.1, and the limit will tighten to 5.9 times this quarter, he wrote in a December report.

Casino Revenue

Casinos across the U.S. are suffering as consumers cut spending in the recession. Revenue on the Las Vegas Strip, the biggest U.S. gambling center, slid 9.3 percent in the first 11 months of 2008 and was poised for its biggest annual drop since data started being compiled in the mid-1980s, the Nevada Gaming Control Board said. Casino revenue in Atlantic City, New Jersey, tumbled a record 19 percent in December, the New Jersey Casino Control Commission said.

Trump Entertainment Resorts Inc., founded by developer Donald Trump, is negotiating a debt restructuring after the Atlantic City, New Jersey-based casino owner skipped a $53 million interest payment that was due Dec. 1.

Detroit is facing more job losses than the rest of the country after U.S. auto sales tumbled 18 percent last year. Unemployment for the metropolitan area was 9.5 percent in November, up from 7.6 percent a year earlier, data compiled by the Bureau of Labor Statistics show. The national average was 6.7 percent that month.

U.S. automakers are also suffering as the car industry in Europe declines. New car registrations in the European Union fell 18.2 percent in December, according to a Jan. 15 report from the European Automobile Manufacturers Association in Brussels.

Detroit’s Deterioration

“Historically, even with the high unemployment rate, Detroit had done okay on a relative sense,” Foley said. “But November and December numbers, there was a sharp drop-off.”

Deutsche Bank, which arranged the MotorCity loan in 2005, proposed Jan. 13 that CCM increase interest payments to a minimum of 7.75 percent or 5 percentage points more the London interbank offered rate when Libor exceeds 2.75 percent. CCM currently pays 2 percentage points more than Libor, which ended last week at 1.17 percent.

CCM offered to pay a fee of 50 basis points to lenders if they agreed to the change, according to S&P’s LCD, which reported the proposal earlier this month. A basis point is 0.01 percentage point. In exchange, the debt-to-earnings ratio would be increased to 8 times, S&P’s LCD said, without saying where it got the information.

A majority of the investors rejected the offer and asked Ilitch to inject additional cash into the casino, said the investors, who declined to be identified.

Dallas-based Highland, Credit Suisse of Zurich and other lenders said that without more equity, Ilitch must pay annual interest of 18 percent or 15 percentage points more than Libor, whichever is higher, according to the investors. The interest would be split between cash and payment-in-kind, they said.

Credit Suisse spokeswoman Suzanne Fleming, Highland partner Jack Yang and Deutsche Bank spokesman Scott Helfman declined to comment.

To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.

Last Updated: January 26, 2009 05:42 EST

MotorCity Casino and Greektown saddled with debt, falling revenues; investors making demands

1.25.09

MotorCity, Greektown deal with bad hands of debt

By Chad Halcom and Nancy Kaffer

Two Detroit casinos are rolling snake eyes in the debt market.

A top ratings service downgraded its outlook for MotorCity Casino's parent company, citing a host of financial concerns. Greektown Holdings L.L.C. has until the end of this week to submit a reorganization plan that can resolve its swelling debts without need for a sale.

An agreement entered in U.S. Bankruptcy Court last month between the troubled Greektown Casino owners and its creditors gives the parties until Feb. 1 to submit a “co-exclusive” plan to restructure and settle its debts.

In other words, if the casino company doesn't submit a plan — with the consent of as many bondholders and other litigants as possible — by the deadline, creditors can submit restructuring plans of their own.

The Detroit City Council expects to meet today in a closed session with its Law Department and Chicago-based law firm Shefsky & Froelich Ltd. to review confidential new documents in the ongoing bankruptcy case, in which Detroit is a party.

A deputy press secretary for Detroit Mayor Ken Cockrel Jr. said he believes Greektown will submit a plan by week's end, but an attorney for the casino's creditors said there it might be “difficult” to craft a complete plan with all parties' consent by the deadline.

As late as last week, involved parties were discussing the shape of a reorganization plan, said Robert Gordon of Detroit-based Clark Hill P.L.C. and attorney for Greektown's unsecured creditors' committee.

Greektown, majority-owned by the Sault Ste. Marie Tribe of Chippewa Indians, and the creditors have also had to discuss a few preliminary offers to buy the casino and its assets, which came in earlier this month as part of the proceedings, Gordon said.

“There still has to be some digestion of the proposals that have come in,” he said. “That's why I think there's going to be some possible difficulty or delay in crafting a full plan before the deadline.”

Marian Ilitch-owned MotorCity's fiscal woes were enumerated in a statement posted on Moody's Investors Services' Web site, announcing the downgrade of parent company CCM Merger Inc.'s outlook to negative.

Last fall, CCM owners contributed $25 million in cash equity to enable the business to meet its September debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio. Moody's analysts warn that another equity infusion might be required for CCM to meet its year-end debt-to-EBITDA ratio.

CCM's debt limit is currently seven times EBITDA, according to Moody's, but that ratio could increase in 2009 because of a drop in gaming revenue — down 11 percent in December — that could offset earnings from the casino's expansion and lead to negative cash flow.

CCM's owners would have to ask to amend its lending covenants to increase its debt-to-EBITDA ratio or risk becoming noncompliant, according to Moody's.

Greektown may have its work cut out in proving it can resolve debts as it faces falling revenue and lost market share. A 2008 revenue and tax collection report prepared by the Michigan Gaming Control Board shows that revenue fell for all three casinos in December, with Greektown's dropping 12 percent.

MotorCity ended 2008 with $464 million in revenue, compared with $480 million in 2007. Greektown finished with $316 million compared with $341 million last year.

“Nothing before us suggests the industry isn't still solvent. The casinos as a whole showed 1.8 percent revenue growth over the previous year,” said Rick Kalm, the Gaming Control Board's executive director.

Edward Gudeman, president and managing partner of bankruptcy law firm Weik & Associates P.C. in Royal Oak, said Greektown's ability to control its own future likely comes down to showing an ability to make a profit on operations — exclusive of debt.

“If they can't show that in the plan, or the plan fails to execute, the case could be converted to Chapter 7 and be forced to sell,” he said.

Greektown sought bankruptcy protection in May, citing at least $243 million in unsecured debt to 40 unsecured creditors, and has since gained regulatory approval from the Gaming Board to borrow another $100 million more.

A new hotel is expected to open in a newly built tower along Monroe Street next month.

Chad Halcom: (313) 446-6796, chalcom@crain.com
Nancy Kaffer: (313) 446-0412, nkaffer@crain.com

Desperate to attract guests; MotorCity Casino throwing in Red Wings tickets, transportation

According to the Website gadling.com, MotorCity Casino is giving away Detroit Red Wings tickets in travel packages designed to entice guests to stay at the one-year-old 400-room MotorCity Casino Hotel:

Detroit's Greektown and MotorCity Casino are not doing as well as last year. Either are Indiana's. This is the time to look to these places for vacation deals. At MotorCity Casino there are overnight packages that include a variety of perks like food credit and Red Wing hockey game tickets.

And an article published on 1.25.09 in the Columbus Dispatch confirms the Red Wings ticket give-away too:

You know the economy is in bad shape when Americans stop gambling.

Like just about every other industry, casinos have taken a big hit recently...

Detroit's Greektown Casino filed for bankruptcy protection in the spring. Revenue was down more than 7 percent at the casino last year. Revenue was also down at Detroit's MotorCity Casino by more than 3 percent in 2008...

MotorCity Casino in Detroit is offering several overnight room packages for $149 with a $50 food credit, $159 with two $30 gaming vouchers or $179 with two tickets to a Red Wings hockey game, including a shuttle to Joe Louis Arena...

Michael Ilitch and his wife Marian are owners of the Stanley Cup winning Detroit Red Wings NHL franchise and their company Olympia Entertainment retains the management contract for Joe Louis Arena. Marian Ilitch is the owner of Detroit's struggling MotorCity Casino. Ilitch Holdings, Inc. is the umbrella company for all Ilitch owned enterprises. Among other companies in the Ilitch Holdings family are also the Detroit Tigers and Little Casesar Enterprises, Inc.

During a recent six-week period, Moody's twice downgraded the credit ratings for Ilitch-owned CCM Merger, Inc., a parent of MotorCity Casino. In 2005, Ilitch financed the acquisition as well as renovation/expansion of MotorCity Casino through borrowing/offerings totalling at least $1 billion. The new credit rating, "Caa," implies investments in the casino parent are now "judged to be of poor standing and are subject to very high default risk."

In September 2008, Ilitch injected $25 million in cash into the casino venture to escape a violation of lending covenants (debt-to-EBTIDA ratios). But at the end of 2008, when 4th quarter disclosures were made, it was revealed CCM Merger had violated those loan covenants. As a remedy, Ilitch is seeking to amend those lending covenants, loosening the debt-to-EBTIDA ratios -- apparently higher now than it was during the $300 million construction project. However, investors are demanding Ilitch inject further cash into the casino company and oppose amending the loan covenants.

Revenues reported by MotorCity Casino in 2008 were the lowest reported since 2005 -- before the gambling hall was expanded and a 400-room hotel addition was complete. And in December 2008 alone, MotorCity Casino's revenues fell 11.5%.

MotorCity Casino Hotel: Detroit Red Wings Package

MotorCity Casino had worst year since 2005 -- despite larger gambing hall and new 400-room luxury hotel

According to the Michigan Gambling Control Board, annual revenues reported by MotorCity Casino for 2008 were the lowest realized by the Ilitch-owned casino since 2005; even though construction on MotorCity Casino's $300 million renovation/expansion project was in full swing during 2006 & 2007.

• On 11.30.05, MotorCity Casino broke ground on construction.
• The casino expanded its gambling floor by a third and unveiled 100,000 square feet of updated gaming space to the public on 6.07.07.
• A 400-room luxury hotel addition opened to the public on 11.29.07.

Nevertheless, post construction revenues don't reflect the larger entertainment complex.

On 1.16.09, Moody's downgraded the credit ratings of MotorCity Casino's parent (CCM Merger, Inc.) for the second time in a six week period.

CCM Merger, Inc.. is seeking to amend loan convenants to allow for even higher debt ratios despite telling investors originally that such ratios would be lower after construction was completed. As of 12.31.08, CCM Merger will be in violation of the existing convenant absent this amendment.

Investors are rejecting the idea of amendment convenants and instead have called for the casino's owner, Marian Ilitch to inject more cash into the Casino.

Crain's Detroit Business has reported that Ilitch was already forced to inject $25 million into the casino in September 2008 in order to avoid being in violation of loan covenants at the end of the 3rd Quarter.

Lowered credit rating may make it more difficult for Ilitch owned casino to raise cash

1.23.09

GAMING: Bond rating lowered

Moody's credit rating agency has downgraded the bond rating of MotorCity Casino's parent company, CCM Merger Inc., potentially making it more difficult for the casino and hotel owned by Marian Ilitch to raise cash.

Jacci Woods, a spokeswoman for the casino, said Thursday she could only say that CCM Merger was negotiating changes to its credit agreements to bring the terms that were set in 2005 "to levels consistent with those of other gaming operations in the United States."

The difficult economy has cut into casino revenues.

Motor City ended 2008 with $465 million in annual revenue, down from $480 million the year before.

Marian Ilitch, the wife of pizza-sports-entertainment mogul Mike Ilitch, is the sole owner of CCM Merger.

MotorCity Casino Owner Violates Convenants, Downgraded

Downgrades
MotorCity Casino Violates Loan Covenants, Downgraded

By Bill Rochelle

CCM Merger Inc., the indirect owner of the MotorCity Casino in Detroit, received a second downgrade inside six weeks from Moody’s Investors Service on Jan. 16 following the announcement it needs an amendment to a loan covenant for the Dec. 31 quarter.

The busted covenant resulted from gaming revenue that declined 11 percent in December.

Moody’s conjectured that CCM may need for cash to be invested by the owner before it lands a covenant amendment.

The $300 million in senior unsecured notes went down to Caa3. Both ratings were down one level.

Net revenue for 12 months ended in December was $480 million, Moody’s said.

A competing casino in Detroit, Greektown Holdings LLC, has been in Chapter 11 reorganization since May. Greektown is owned by a tribe of the Chippewa Indians.

Ratings Action: Moody's downgrades CCM Merger to Caa1 from B3; negative outlook

Ilitch Casino's credit downgraded again; $50M bond payment coming due; may need to raise cash

1.22.09

MotorCity credit rating downgraded, may need to raise cash

By Nancy Kaffer

January has brought a slate of bad news for CCM Merger Inc., the financial entity that serves as parent company to MotorCity Casino, owned by Marian Ilitch.

Moody’s Investors Services has downgraded CCM’s credit rating for the second time in two months, questioning the company’s ability to meet its year-end debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio without amending its credit agreements.

For those amendments to happen, a statement on Moody’s Web site said, CCM’s owners might need to throw in more equity.

Depressed gaming revenues — down 11 percent in December — could offset incremental earnings from the completion of the casino’s expansion and the subsequent cessation of significant capital spending, according to the Moody’s statement. This could result in negative cash flow in 2009 and an increased debt-to-EBITDA ratio, currently at a debt limit of about seven times CCM’s EBITDA.

Those concerns come on the heels of a $25 million cash equity contribution made in September, necessary for CCM to meet its Sept. 30 debt-to-EBITDA covenant.

CCM’s negative rating outlook will affect about $1 billion in rated debt, according to a statement on Moody’s Web site.

The downgrade was prompted in part, according to the statement, by a CCM disclosure that it will need to seek such amendments from its bank lending group in order to comply with its bank loan leverage covenant for the fiscal year ended Dec. 31.

The statement noted that a $50 million Economic Development Corporation bond matures in May.

MotorCity ended 2008 with $464 million in revenue, according to the Michigan Gaming Control Board, and controls 33 percent of Detroit’s gaming market.

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.

Moody's downgrades MotorCity Casino's Credit Ratings for the second time in two months

Rating Action: CCM Merger, Inc.

Moody's downgrades CCM Merger to Caa1 from B3; negative outlook

Approximately $1 Billion of Rated Debt Affected.

New York, January 16, 2009 -- Moody's Investors Service today lowered CCM Merger, Inc.'s ("CCM") ratings in response to the company's recent disclosure that it will need to seek an amendment from its bank lending group in order to maintain compliance with its bank loan leverage covenant for the fiscal year ended December 31, 2008. The rating outlook is negative.

The following ratings were lowered:

• Corporate Family Rating to Caa1 from B3
• Probability of Default Rating to Caa1 from B3
• $100 million 1st lien revolver expiring 2010 to B3 (LGD3, 34%) from B2 (LGD3, 34%)
• $606 million 1st lien term loan B due 2012 to B3 (LGD3, 34%) from B2 (LGD3, 34%)
• $300 million 8% senior unsecured notes due 2013 to Caa3 (LGD5, 87%) from Caa2 (LGD5, 87%)

Although CCM posted a slight increase in October monthly gaming revenues (2008 versus 2007) following the grand opening of its permanent casino facility, an 11% decline in December monthly gaming revenue -- the largest monthly decline in CCM's recent history -- placed the company in the position of not being able to meet its year-end debt/EBITDA bank loan covenant.

Moody's also believes the large decline in December 2008 monthly gaming revenues suggests that the pressure on earnings from weakened economic conditions has increased further. This heightened earnings pressure could more than offset the expected benefit to free cash flow in 2009 from the incremental earnings generated by the expansion and from substantially lower capital spending. As a consequence, free cash flow could be negative in 2009 and debt/EBITDA -- currently at about 7 times -- could increase further.

The negative outlook considers the uncertainty with regard to CCM's ability to obtain waivers and/or amendments and maintain access to its revolver availability. This availability will be needed to satisfy the May 2009 maturity of a $50 million Economic Development Corporation (EDC) bond. The negative outlook also incorporates 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.

Ratings would likely be lowered if CCM is unable to obtain acceptable amendments or waivers from its lenders. The rating outlook could be revised to stable if covenant compliance issues are resolved in a manner that results in a sustainable capital structure and covenant compliance going forward.

Moody's last rating action for CCM was on December 4, 2008, when the company's corporate family rating was lowered to B3 from B2 and a negative rating outlook was assigned.

The principal methodology used in rating CCM was Moody's Global Gaming Methodology, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the rating Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.

CCM Merger, Inc. indirectly owns and operates the MotorCity Casino in Detroit, Michigan. The company generated net revenue of about $480 million for the fiscal year ended December 31, 2008.

New York
Keith Foley
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Under Ilitch ownership, MotorCity Casino's credit ratings continue to drop

Standard & Poor’s corporate credit ratings for MotorCity Casino (CCM Merger, Inc.) have continued a negative slide since Marian Ilitch took control of the Detroit gambling hall from Mandalay Resort Group/MGM Mirage in April 2005. This despite Ilitch’s $300 million remodel and expansion of the property which added square feet to the gaming floor and a 400-room, 17-story hotel with amenities; and the relative success of the MGM Grand Detroit Casino.

While MotorCity Casino was controlled and managed by Mandalay Resort Group its corporate credit rating was “B+.” A year after Marian Ilitch (CCM Merger, Inc.) took over complete ownership and management of MotorCity Casino, analysts at Standard & Poor’s dropped the credit rating to “B” and at times assigned a negative outlook.

Analysts had originally been told to anticipate some consistent upswing in revenues and a corresponding decrease in debt ratios with the larger gaming floor and the hotel addition; but instead, MotorCity Casino has failed to produce a greater revenue stream and its debt ratios are questionable.

In September, Standard & Poor’s assigned a negative outlook to MotorCity Casino (CCM Merger, Inc.). And then earlier this month, Standard & Poor’s again dropped MotorCity Casino’s credit rating to a "B-" and assigned a negative ratings outlook. Among other concerns, Standard & Poor’s has discovered declining cash flow at MotorCity Casino.

Standard & Poor’s defines these ratings as having significant speculative risk but suggests an entity with a “B” rating generally has the capacity to meet its financial commitments. But with a "B-" rating and a negative outlook assigned, Standard & Poor’s suggests any further adverse business, financial or economic conditions will likely impair MotorCity Casino’s capacity or willingness to meet its financial commitment.

According to the Securities & Exchange Commission (SEC), of those entities Standard & Poor’s assigns a “B” rating, 35.76% experience default; and of those with a rating of “CCC,” the next ratings step down from “B” ratings, 54.38% experience default.

In acquiring MotorCity Casino and completing its expansion and remodel, Marian Ilitch (CCM Merger, Inc.) has reportedly amassed approximately $1 billion of debt.

See: S&P Issue Ratings for CCM Merger, Inc.

You may also want to review these other recent related posts:

• MotorCity Casino revenues down 7.1% for November
• S&P's fundamental outlook on the gaming industry is negative
• Expanded MotorCity Casino Hotel bringing in less revenue

S&P's fundamental outlook on the gaming industry is negative

12.04.08

Chancy Times for Casino Companies
S&P's fundamental outlook on the gaming industry is negative, as big players like MGM Mirage and Las Vegas Sands grapple with economic weakness and heavy debt

By Esther Kwon
From Standard & Poor's Equity Research

Based on research done during a recent visit to Las Vegas, Standard & Poor's Equity Research's fundamental outlook for the casinos and gaming industry continues to be negative.

Though the private equity boom in the sector led to significantly higher valuations, we see high debt loads compounding difficulties from economic weakness. Debt-to-EBITDA ratios for casino/gaming companies that file public financial information with the Securities & Exchange Commission rose to 7.5 in the 12 months ended June 30, 2008 from 4.5 in 2002, according to Standard & Poor's Credit Market Services, which operates independently of Standard & Poor's Equity Research Services.

With cash flows declining, debt-burdened properties need to keep occupancies high and at the same time cut costs to remain in compliance with debt covenants. However, deteriorating service levels could make that difficult, and we expect price discounting to intensify. We expect lodging revenue per available room, or RevPAR, declines of 5% to 8% in 2009, but we see those of casino hotel rooms falling more. (See Complete Story)

You may also want to review these recent related posts:

• Under Ilitch ownership, MotorCity Casino's credit ratings continue to drop
• MotorCity Casino revenues down 7.1% for November

Gaming industry projected to face significant pressure in 2009; recovery unlikely until 2010

PRESS RELEASE
Fitch: U.S. Gaming Industry Recovery Unlikely Until 2010

NEW YORK, Dec 16, 2008 (BUSINESS WIRE) -- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings...

...The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip...

2009 Credit Outlook

Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations.

The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn... (Complete Analysis)

Expanded MotorCity Casino Hotel bringing in less revenue

According to an article published 12.10.08 in the Detroit News:

"Year-to-date casino revenues are up for Detroit's gaming market as a whole, but only because of large gains at MGM Grand; both MotorCity and Greektown are taking in less revenue this year than they did in 2007." (Complete Story)

On 12.05.08 both Standard & Poor's and Moody's lowered the credit ratings of and raised default concerns related to Ilitch-owned CCM Merger, Inc., the parent of Detroit Entertainment LLC, which does business as MotorCity Casino. Both ratings firms placed CCM Merger on Negative watch lists.

Standard & Poor's uncovers declining cash flows at MotorCity Casino

12.05.08

Apparently after putting MotorCity Casino's parent CCM Merger, Inc. on CreditWatch and downgrading its credit and default ratings on 12.05.08, Standard & Poor's discovered the parent of MotorCity Casino had a more significant decline in cash flows than had been understood in taking those actions and and as such Standard & Poor's was forced to revise downward and publish the recoverability ratings of Senior Notes CMM Merger, Inc. is owing investors.