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S&P affirms Penn National, lowers Pinnacle Entertainment rating

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According to Market Intelligence, December 2022

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S&P affirms Penn National, lowers Pinnacle Entertainment rating

S&P Global Ratings affirmed Penn National Gaming Inc.'s B+ corporate credit rating following its $2.8 billion deal to acquire Pinnacle Entertainment Inc. and lowered the latter's corporate credit rating to B+ from BB-.

Moody's Investors Service placed both companies on review for downgrades following the announcement of the cash and stock deal.

S&P Global Ratings said it plans to raise its valuation for the combined entity. The affirmation of Penn National Gaming reflects the rating agency's view that the combined entity can support higher leverage than Penn National Gaming could on a stand-alone basis.

Pinnacle Entertainment's lowered rating reflects S&P Global Ratings' expectation that lease-adjusted leverage for the combined entity will increase to the low-6x pro forma for the acquisition, which stands well above the rating agency's current 5.5x lease-adjusted leverage downgrade threshold for Pinnacle Entertainment.

S&P Global Ratings' outlook for both Penn National Gaming and Pinnacle Entertainment is stable.

Moody's said Penn National Gaming's pro forma leverage is "very close" to the rating agency's stated debt/EBITDA downgrade trigger of 6.0x.

"Moody's review will focus on Penn's willingness and ability to reduce post acquisition leverage, and weigh this against the favorable longer-term credit benefits related to increased size, diversification, and economies of scale arising from its acquisition of Pinnacle. At this time we expect any downgrade would be limited to one-notch," the rating agency said.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.