Alliance Gaming Announces Moody's Raises Ratings to Ba3; Outlook Stable
July 13 2004 - 7:15AM
PR Newswire (US)
Alliance Gaming Announces Moody's Raises Ratings to Ba3; Outlook
Stable LAS VEGAS, July 13 /PRNewswire-FirstCall/ -- Alliance Gaming
Corp. (NYSE:AGI) announced today that Moody's Investors Service has
raised the ratings of the Company in response to the completed sale
of United Coin Machine Company (UCMC) to Century Gaming. Moody's
cited the consideration for the UCMC transaction of approximately
$100 million in cash and the assumption by Century of approximately
$5 million in debt. Moody's also considered "the company's improved
financial profile and positive industry trends regarding the growth
and development of gaming equipment and software products" as
factors in the upgrade. The following ratings were affected: * $125
million senior secured revolving credit facility due 2008, to Ba3
from B1; * $350 million senior secured term loan due 2009, to Ba3
from B1; * Senior implied rating, to Ba3 from B1; * Senior
unsecured issuer rating, to B1 from B2; and * Stable rating outlook
In a press release, Moody's said: In November 2003, Moody's revised
Alliance's rating outlook to positive from stable based on the
company's announcement that it agreed to acquire 100% of the
outstanding stock of Sierra Design Group, a supplier of Class II
and Class III gaming devices, systems and technology. Other factors
supporting the rating outlook revision at that time included other
actions that the company had taken designed to improve the
company's asset profile, reputation, growth prospects, operating
margins, and free cash flow generating ability. These actions
included the sale of Bally Wulff, a series of small, casino systems
related acquisitions, and the company's announcement that it had
agreed to sell United Coin. As the second largest gaming equipment
supplier in North America, Alliance directly benefits from
increased demand from the legalization of new gaming jurisdictions
and new gaming facilities, shorter product life cycles, and
improvements in technology. These industry trends, along with the
development and introduction of highly popular game titles and a
relatively conservative financial policy, has resulted in
sustainable credit metrics consistent with a Ba3 senior implied
rating. Leverage, measured using debt/EBITDA, is currently about
3.3x while cash flow after interest, taxes, working capital,
capital expenditures and other investing activities is about $26
million. Also supporting the higher rating is the company's good
liquidity profile. At March 31, 2004, Alliance had $55 million of
availability under a $125 million revolving credit facility and
cash of about $32 million. There are no material debt maturities
until the company's revolving credit facility expires in 2008.
Alliance's Ba3 senior implied rating is limited by its relatively
small size and narrow cash flow base. Additionally, while the
company maintains a strong market position relative to other gaming
equipment suppliers, International Game Technology, a much larger
and financially stronger company, overwhelmingly dominates the
industry. Alliance is also exposed to any slowdown in spending on
slots and systems. While the overall market for gaming equipment
will continue to grow, slower product approval and deployment in
the New York Lottery market and Nevada gaming market, were
partially responsible for the company revising its earning guidance
downward for fiscal years 2004 and 2005. Over the next few years,
Alliance, like other gaming equipment companies, remains
susceptible to the uncertainty associated with the timing of new
domestic and international gaming jurisdictions. The stable rating
outlook considers Alliance's established product line, increased
focus on the higher margin gaming systems segment, and the relative
stability of the gaming industry with respect to product demand.
The stable rating outlook also anticipates that, despite the recent
announcement of the appointment of a new Chief Executive Officer,
Alliance will maintain a financial policy consistent with its Ba3
senior implied rating. Acquisitions to date have been small. Going
forward, small to medium sized acquisitions could be accomplished
at the Ba3 senior implied. However, any material change in senior
management's operating and/or financial policy's that results in
increased operating and/or financial risk could have a negative
impact on the current rating. Alliance Gaming is a diversified
gaming company with headquarters in Las Vegas. The Company is
engaged in the design, manufacture, distribution and operation of
advanced gaming devices and systems worldwide, operates a gaming
machine route in Louisiana and operates Rainbow Casino in
Vicksburg, Miss. Additional information about the Company can be
found at http://www.alliancegaming.com/. This news release may
contain "forward-looking" statements within the meaning of the
Securities Act of 1933, as amended, and is subject to the safe
harbor created thereby. Such information involves important risks
and uncertainties that could significantly affect the results in
the future and, accordingly, such results may differ from those
expressed in any forward- looking statements. Future operating
results may be adversely affected as a result of a number of risks
that are detailed from time to time in the company's filings with
the Securities and Exchange Commission. For further information
please contact: investors and media, Robert L. Saxton of Alliance
Gaming, +1-702-270-7600. - ALLIANCE GAMING CORP. - DATASOURCE:
Alliance Gaming Corp. CONTACT: investors and media, Robert L.
Saxton of Alliance Gaming, +1-702-270-7600 Web site:
http://www.alliancegaming.com/
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