May 14, 2014 / 7:28 PM / 3 years ago

Fitch: GLPI Meadows Acquisition May Set Bar for Gaming Multiples

(The following statement was released by the rating agency) NEW YORK, May 14 (Fitch) The Meadows acquisition by Gaming, Leisure & Property, Inc. (GPLI), which is 9x EBITDA, may set a new bar for regional gaming multiples, according to Fitch Ratings. Meadows is the name of the casino asset owned by Cannery Casino Resorts, LLC. We believe the 9x EBITDA multiple GLPI is paying for a Pittsburgh area casino could be the beginning of a trend, and it would be a positive for the industry as it would create an incremental equity cushion for regional gaming operators (such as Pinnacle, Boyd and Caesars) whose regional assets normally trade closer to 7x-8x. Pinnacle recently sold a St. Louis asset for an EBITDA multiple of roughly 7.5x while acquiring Ameristar. However, we note that the higher trading multiples may encourage increased M&A activity at higher multiples, which could then spur borrowing and lead to higher leverage ratios in the industry. Fitch's 2014 sector outlook called for deleveraging among most gaming operators given the healthy FCF profiles, lack of investment opportunities and debt covenants that restrict shareholder-friendly activity. Although the two acquisitions announced so far by GPLI (Casino Queen is the other) are encouraging, some questions remain on whether GLPI's proposition would be enticing enough for gaming operators seeking to operate casinos without owning the underlying assets. For instance, in the case of Casino Queen, the seller was partly motivated by the risk of a debt covenant default, which GLPI addressed by providing a new loan to Casino Queen. GLPI is buying Meadows outright and still needs to find a buyer for the operating license. Per GLPI, there are 257 commercial gaming assets in U.S., of which 118 are owned by privately held companies. For additional information on Gaming, Lodging and Leisure (GLL), please see our electronic newsletter for brief sector comments, recent and upcoming events, as well as links and summaries to rating actions and detailed reports. You'll also find links to GLL-related reports/comments from other Fitch Ratings groups including Leveraged Finance, Credit Market Research, REITs, Sovereign/Public Finance and Structured Finance. Contact: Michael Paladino CFA Senior Director Corporates +1 212 908-9113 Stephen Boyd, CFA Director U.S. REITs +1 212 908-9153 Alex Bumazhny Director Corporates +1 212 908-9179 Kellie Geressy-Nilsen Senior Director Fitch Wire +1 212 908-9123 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available on www.fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. Applicable Criteria and Related Research: Gaming, Lodging and Leisure Global eNewsletter here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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