Fitch Ratings affirmed Boyd Gaming Corp.'s long-term issuer default rating at B+ and revised its rating outlook to stable from positive in light of the company's plan to acquire the operations of four Penn National Gaming Inc. regional gaming assets for $575 million.
The rating agency views the planned acquisition, which is in conjunction with Penn National's $2.8 billion cash-and-stock deal to buy out Pinnacle Entertainment Inc., favorably as it will expand Boyd Gaming's regional gaming network and diversify the company's asset base with the addition of three new regional gaming markets. The assets being acquired also offer minimal risk of new competition and account for about 26%, 26% and 32% of market share in St. Louis; Kansas City, Mo.; and Cincinnati, respectively, based on year-to-date gross gaming revenues, Fitch said.
Fitch credited the outlook revision to the debt-funded transaction, which it said should allow Boyd Gaming to maintain its traditional debt/EBITDA leverage at above 5x for a longer period than the rating agency's earlier projections. The stable outlook also takes into account the master lease that the company will enter into with Gaming & Leisure Properties Inc., which should elevate Boyd Gaming's fixed cost structure, according to the rating agency.