Saracen receives rating upgrade
Saracen Development LLC, a wholly owned Quapaw Nation company, on Thursday announced improvements to its credit rating by Moody’s and S&P, two of the world’s three largest credit rating agencies.
Saracen owns the Saracen Casino Resort in Pine Bluff.
“We are delighted that two such respected credit rating agencies like Moody’s and S&P saw the need to improve our ratings on the same day,” Quapaw Nation Affairs Committee Chairman Joseph Tali Byrd said in a statement. Press release. “This rating improvement sends a strong message that our Saracen gaming operation is performing well and that there is confidence in our ability to service the debt.”
Moody’s Investors Service (âMoody’sâ) upgraded the rating of the Saracen Development, LLC (Saracen) family of companies and Caa1’s $ 285 million senior secured notes due 2025 to B3 and its probability rating fault at B3-PD of Caa1-PD. The rating outlook is positive.
S&P Global Ratings (âS&Pâ) has upgraded its issuer credit rating on Saracen to âB-â instead of âCCCâ. S&P also upgraded the company’s senior covered bond issuance rating two notches to âB-â. The rating outlook is positive.
âMoody’s and S&P based their decisions on factors such as our handling of the covid-19 crisis, our company’s financial creditworthiness and our superiority in the Arkansas gambling market. This improvement in ratings and confidence she represents serve well the citizens of the Quapaw Nation, as well as the citizens of Pine Bluff and Jefferson County. This is fantastic news as we continue to strengthen our partnerships within the community, âsaid Byrd .
In issuing the upgrade, Moody’s indicated that Saracen will generate annual EBITDA of between $ 64 million and $ 70 million in its first full year of operation, above EBITDA expectations of $ 60 million for the first year of Moody’s. This performance was despite the challenges and uncertainty associated with the coronavirus and initial concerns from Moody’s that there is only a limited history of commercial gambling in Arkansas.
EBITDA is earnings before interest, taxes, depreciation and amortization.
The rating agency also took into account the improvement in Saracen’s liquidity. Moody’s estimates that Saracen will generate at least $ 20 million of free cash flow in its first full year of operation and maintain nearly $ 25 million of unallocated cash on its balance sheet.
Like Moody’s, S&P noted that the upgrade to âB-â reflects Saracen’s faster-than-expected EBITDA and cash flow at a level that covers fixed charges despite delays in opening Saracen Casino Resort. and the initial operating restrictions due to the covid-19 pandemic. As a result, the agency said it no longer believes Saracen is having difficulty meeting its fixed costs and expects its leverage to improve in fiscal 2021.
âA double credit rating upgrade on the same day by the world’s two largest credit rating agencies is impressive in itself. But the double upgrades for a tribal entity are quite unprecedented, âsaid Quapaw Nation Affairs Committee secretary-treasurer Guy Barker.
âThe factors that led to Saracen’s rating being upgraded by Moody’s and S&P indicate increased confidence in our financial performance and the prospects of the nation’s largest and most respected financial institutions. This rating increase is an external validation of our dedicated efforts to eliminate debt. and is confirmation of our increased ability to do so, âsaid Barker.