Ratings agencies downgrade Revel after slow start

Moody's Investors Service lowered Revel's Corporate Family and Probability of Default ratings on Wednesday, citing its poor performance in the cutthroat Atlantic City market. The move follows similar action last week by Standard & Poor's, which also cut its rating of Revel's credit quality.

The us$ 2.4 billion casino opened in April, but has been stuck in 8th place out of the city's 12 casinos in terms of gambling revenue. It is trying to increase its credit commitments from lenders to us$ 100 million in a deal it hopes to complete next week. Revel posted a us$ 35 million quarterly operating loss.
Moody's said it acted after seeing Revel's revenue and earnings, both of which came in lower than what the ratings agency had expected.

"Based on these results, Moody's has increased concern that Revel will not be able to achieve targeted business volumes and earnings necessary to cover its fixed charge burden," the agency wrote on Wednesday. "And while Revel's monthly gaming revenue has increased ... it is, in Moody's opinion, significantly below the rate necessary for Revel to maintain an adequate level of liquidity and support its current debt burden."

Last week, S&P cut the corporate credit ratings on the resort and casino operator to CCC from B-, also voicing concern about its performance thus far.
"The downgrade reflects our view that a strong opening for the Revel Resort was critical to the company's ability to ramp up cash flow generation to a level sufficient to service its capital structure," S&P analysts wrote. And on Monday, John Kempf, a casino analyst for RBC Capital Markets, said in a research report that "Revel is off to a disappointing start."

Revel was widely seen before its opening as Atlantic City's best hope to turn around a nearly six-year streak of plunging casino revenues. By offering high-end luxury and more resort-style amenities, the idea was to attract vacationers and business groups that would stay for several days, and help create new business for the struggling seaside resort.

But thus far, analysts say Revel seems to have siphoned off business from existing casinos instead of broadening the Atlantic City market.