Moody's Investors Service reduced Bally's Corporation's key credit ratings on Friday, lowering the company's Corporate Family Rating (CFR) to B3 from B2 and its Probability of Default (PD) rating to B3-PD from B2-PD. The ratings agency affirmed the Ba3 rating on the senior secured first lien revolving credit facilities while moving the senior unsecured notes down to Caa2 from Caa1. Moody's maintained the speculative grade liquidity rating at SGL-3 and kept the outlook stable.
This downgrade ends a ratings review that was opened on August 2, 2024. In explaining the action, Moody's pointed to governance considerations tied to Bally's development strategy and the execution of sale-leaseback transactions, both of which have contributed to higher debt levels on the company's balance sheet. The agency said it expects Bally's debt/EBITDA to remain elevated through 2026 while the company concentrates on developing its casino in Chicago.
Beyond Chicago, Bally's has additional capital-intensive projects underway or planned in New York and Las Vegas. Moody's noted that these initiatives will require significant funding and are likely to push leverage higher initially until those projects are completed and operations begin to ramp. The lowered B3 CFR reflects Moody's view of the company's high leverage and the very competitive nature of the online gaming market, particularly in North America, where ongoing investment will be necessary for Bally's to protect and grow its position.
Moody's also highlighted several offsetting factors. Positive credit attributes cited include increased product and geographic diversification resulting from prior acquisitions, growth in the company's core casinos and resorts segment, continued expansion of the Bally's Intralot business, and an absence of material near-term maturities. The agency said the stable outlook is grounded in an expectation of continued revenue and earnings growth, along with gradual deleveraging as the new projects come online and ramp their operations while Bally's maintains at least adequate liquidity.
Looking ahead, Moody's outlined clear conditions for rating movement. An upgrade would require Bally's to keep debt/EBITDA below 6.0x, while demonstrating at least good liquidity and persistent positive free cash flow. Conversely, ratings could be downgraded if the company's development projects fail to generate sustained earnings growth sufficient to keep debt/EBITDA below 8.0x, or if liquidity weakens.
Summary
Moody's has downgraded Bally's Corporate Family Rating to B3 and its Probability of Default rating to B3-PD, while affirming certain secured facility ratings and lowering senior unsecured notes to Caa2. The agency cited rising leverage from development plans and sale-leasebacks, expects elevated debt/EBITDA through 2026 as Chicago and other projects proceed, and maintained a stable liquidity rating at SGL-3.
Key points
- Moody's cut Bally's CFR to B3 from B2 and PD rating to B3-PD from B2-PD, and downgraded senior unsecured notes to Caa2 from Caa1 - impacting the gaming and leveraged loan markets.
- Rising debt tied to development plans and sale-leasebacks, especially the Chicago casino project, is expected to keep leverage elevated through 2026 - relevant for capital markets and banking exposures to gaming companies.
- Positive offsets include diversification from acquisitions, growth in casinos and resorts, expansion of Bally's Intralot business, and limited near-term maturities - factors that support liquidity and future deleveraging.
Risks and uncertainties
- Elevated leverage through 2026 as projects are developed could pressure credit metrics if earnings ramp-up lags expectations - a risk to the corporate credit profile and lenders.
- If new developments do not produce sustained earnings growth, Moody's warned that debt/EBITDA could exceed thresholds that would prompt further downgrades - an uncertainty for investors in equity and unsecured bonds.
- Any deterioration in liquidity would increase downside risk to ratings, particularly given the capital requirements of multiple large projects across key U.S. gaming markets.
Moody's review that began on August 2, 2024 has concluded with these rating changes and a stable take on liquidity, leaving the company's long-term credit trajectory contingent on project execution, earnings progression, and managing leverage as new assets come into service.