Gateway Casinos lifted to Caa1 by Moody's following $1.25B term loan placement

Gateway Casinos & Entertainment Ltd. was upgraded on Oct. 22 to Caa1, from Caa2, and its outlook was revised to positive, from negative, at Moody's after the company refinanced its capital structure and added cash to its balance sheet with the placement of a new $1.25 billion term loan. The loan due in 2027, which sources say is split between a US$1.073 billion tranche and a C$218.6 million tranche (Sofr+CSA+800; CDOR+800, 0.75% floor), was assigned a Caa1 senior secured rating.

Moody's said that net of the new loan, the company is limited by "high leverage" in excess of 7.5x through 2022, execution risk on capital projects and an "aggressive financial policy track record." Conversely, the agency sees Gateway benefiting from, among other things, "strong market positions protected by substantial barriers to entry," a favorable provincial regulatory framework and a stable pre-pandemic operating track record.

Moody's regards Gateway's liquidity as "adequate," noting that pro forma for the new loan the company has $110 million of cash on the balance sheet (specifically, about $180 million, less a $70 million "minimum liquidity covenant"). The agency anticipates Gateway's cash flow will be break-even.

Gateway is one of the largest brick-and-mortar casino operators in Canada, with 28 gaming facilities in British Columbia, Alberta and Ontario. It is majority owned by Catalyst Capital Group.