Moody's upgrades Eldorado Resorts rating

At the same time, Moody's assigned to Eagle II Acquisition Company LLC (Acquisition Co.)- a wholly owned subsidiary of ERI - a Ba3 to both the proposed 7 year $1,450 million senior secured term loan and $300 million revolver, and a B3 to the proposed 8 year $375 million senior unsecured notes.

This concludes the review of the company's ratings for upgrade that commenced on September 19, 2016. The outlook is stable. The ratings are subject to final terms and conditions.

The upgrade of ERI's CFR to B1 reflects the material increase in scale in terms of revenues and the number of properties owned and improved geographic diversification as a result of the Isle acquisition. Pro-forma for the acquisition, ERI largest geographic concentration will be in Missouri at 18% of property EBITDA. This diversification mitigates earnings volatility from supply additions and regional economic fluctuations. The upgrade also reflects the reasonable pro-forma leverage on a debt/EBITDA basis which Moody's estimates at about 5.7x (including $35M of cost synergies) for the twelve month period ended December 31, 2016, as well as the ability of the combined entities to generate free cash flow.

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Given the material increase in scale, the combined entities should be able to achieve near and medium term synergies as they leverage marketing capabilities and corporate efficiencies which will improve profitability and cash flow generation, said Moody's Senior Vice President Peggy Holloway

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Proceeds from the new senior secured term loan, the new senior unsecured notes, cash on hand, asset sale proceeds, and ERI equity consideration will be used to finance the acquisition of Isle of Capri Casinos, Inc. (Isle) and to repay its existing debt as well as ERI's existing bank credit facility.

At the close of the acquisition, ERI will assume the obligations of Acquisition Co. as borrower and Acquisition Co. will become guarantor, as such, Moody's will move these ratings to ERI at that time.

The new debt will close and fund into escrow in anticipation of pending approvals from the regulatory gaming commission boards needed to complete the acquisition - which is expected to occur in the second quarter of 2017. During the escrow period, ERI is required to fund interest into the escrow account monthly in advance. If the escrowed funds are not released in connection with the acquisition on or prior to June 19, 2016 or September 18, 2017 if the merger agreement is extended, ERI will be required to redeem the notes and repay the term loan. ERI's existing $375M 7% unsecured notes due 2023 will remain outstanding subject to completion of a consent solicitation.