OREANDA-NEWS. S&P Global Ratings today said it placed its 'B+' corporate credit rating on Las Vegas-based Affinity Gaming on CreditWatch with negative implications.

At the same time, we placed our 'BB-' issue-level rating on the company's senior secured credit facility, consisting of a $75 million revolving credit facility due 2021 and a $300 million term loan due 2023, on CreditWatch with negative implications. Affinity may seek an amendment to its existing credit facility and this debt may remain in the capital structure, and we would lower the issue-level rating at least one notch to reflect the lower expected corporate credit rating. The '2' recovery rating on the facility is unchanged at this time, but we could revise it unfavorably in the event Affinity amends its existing facility to incorporate incremental senior secured debt. In the event Affinity does not amend its existing facility, the currently contemplated aggregate debt commitment provided to Z Capital is sufficient to refinance the company's existing debt. In the event the existing credit facility is refinanced we would not lower the issue-level rating on this debt, and would withdraw the rating upon completion of the refinancing.

"The CreditWatch listing reflects the likelihood that the offer from Z Capital to buyout the approximately 59% remaining equity stake in Affinity that it does not already own will result in incremental leverage and a lower rating on the company if the planned financing is successful," said S&P Global Ratings credit analyst Stephen Pagano.

Z Capital has announced that it has aggregate commitments for debt financing of $465 million to complete the transaction. Assuming the planned financing goes through as currently contemplated, adjusted debt to EBITDA would deteriorate to around 6x in 2017, which would be above our current 5x downgrade threshold. This increase in leverage measures would result in a one-notch lower rating. Also, upon completion of the transaction, Affinity will be controlled by a financial sponsor that may extract cash or otherwise increase leverage over time, providing further support for a weaker financial risk assessment.

We expect to resolve the CreditWatch listing upon completion of the planned financing and lower the corporate credit rating one notch to 'B' from 'B+' to reflect incremental leverage.

In addition, Affinity may seek an amendment to its existing credit facility and this debt may remain in the capital structure, and we would lower the current 'BB-' issue level rating at least one notch to reflect the lower expected corporate credit rating. The '2' recovery rating on the facility is unchanged at this time, but we could revise it unfavorably in the event Affinity amends its existing facility to incorporate incremental senior secured debt. In the event Affinity does not amend its existing facility, the currently contemplated aggregate debt commitment provided to Z Capital is sufficient to refinance the company's existing debt. In the event the existing credit facility is refinanced we would not lower the issue level rating on this debt, and would withdraw the rating following the completion of the refinancing.