OREANDA-NEWS. S&P Global Ratings today raised its issue-level rating on Houston-based gaming operator Golden Nugget Inc.'s $295 million senior unsecured notes to 'B-' from 'CCC+'. At the same time, we revised our recovery rating on the notes to '5' from '6'. The '5' recovery rating indicates our expectation for modest recovery (10%-30%; upper half of range) of principal for lenders in the event of a payment default.

The upgrade reflects a lower assumed level of secured debt outstanding at default under our updated simulated default scenario, which now contemplates a default in the second half of 2019 versus the first half of 2018 in our previous analysis. The lower secured debt level reflects an additional six quarters of amortization under the term loan B and delayed draw term loan, and it results in additional enterprise value at default available to unsecured lenders. The revised default year contemplates a default due to Golden Nugget's inability to refinance the term loan B and delayed draw term loan when they come due in November 2019 because of deteriorating company performance resulting from an economic downturn and increased competitive pressures in the Lake Charles, La. market.

Our 'BB-' issue-level and '1' recovery ratings on Golden Nugget's $75 million revolver due 2018, $350 million term loan B due 2019, and $150 million delayed draw term loan due 2019 remain unchanged. The '1' recovery rating indicates our expectation for very high recovery (90%-100%) of principal for lenders in the event of a payment default.

Golden Nugget is seeking an amendment to its existing credit facility to reduce pricing. The proposed reduction in pricing doesn't affect the issue-level or recovery ratings.

RECOVERY ANALYSIS

Key analytical factors:Our simulated default scenario contemplates a default in the second half of 2019 due to the company's inability to refinance the term loan B and delayed draw due to deteriorating company performance resulting from economic downturn and increased competitive pressures in the Lake Charles, La. market. Simulated default assumptions:Year of default: 2019EBITDA at emergence: $96 millionEBITDA multiple: 6.25xThe $75 million revolver is 85% drawn at defaultSimplified waterfall:Net enterprise value (after 5% administrative costs): $570.6 million---------------------------------------------------Secured debt: $486.4 million-- Recovery expectation: 90%-100% Unsecured debt: $307.5 million -- Recovery expectation: 10%-30% (upper half of range)Note: All debt amounts include six months of prepetition interest.