CHICAGO, May 8 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
reaffirmed the debt ratings of Park Place Entertainment (NYSE: PPE). Ratings
reaffirmed include senior notes at 'BBB-' (Triple-B-Minus), senior
subordinated notes at 'BB+' (Double-B-Plus) and commercial paper at 'D-3'
(D-Three). The reaffirmation affects $1.6 billion of debt securities. The
Rating Outlook remains Stable.
A large and highly diversified asset base, solid cash flow generating
capability and good financial flexibility support PPE's ratings. Offsetting
factors include highly competitive conditions and increased gaming supply on
the Las Vegas strip and the Mississippi Gulf Coast, and the potential for
share repurchases and debt-financed acquisitions.
PPE recently reported strong first quarter operating results, its first
following the December 1999 $3 billion acquisition of Caesars World. During
the quarter, PPE generated $327 million of EBITDA, 69 percent above the prior
year comparable period of $193 million and 18 percent ahead of the pro forma
first quarter 1999 level of $276 million. The pro forma improvement is
largely due to the highly successful performance of the $785 million Paris
property, which opened in September 1999 and produced $34 million of
incremental EBITDA and a 35 percent improvement at the company's three
Atlantic City properties from $62 million to $84 million. This strength was
partially offset by a 33 percent decline at the Las Vegas Hilton ($18 million
versus $27 million) due to competitive pressures and a difficult comparison
from last year.
As a result, PPE generated more than $180 million of free cash flow during
the first quarter, which was used to repay $142 million of bank debt and
repurchase $41 million of stock. In addition, PPE is on track to achieve its
targeted $50 million in acquisition synergies, with an annualized run rate of
more than $40 million having been reached by the end of the recent quarter.
Going forward, continued deleveraging is anticipated as the company's
aggregate free cash flow is expected to approximate $1 billion during 2000 and
2001, with commitments for only $270 million of growth capital projects in
that time frame. Consequently, debt/EBITDA is expected to trend below 4 times
with EBITDA/interest comfortably exceeding 3 times. While DCR expects other
external growth opportunities to be pursued, including acquisitions and new
developments, the reaffirmation assumes the company will continue to maintain
prudent financial policies that are consistent with the existing ratings.
SOURCE Duff & Phelps Credit Rating Co.
 back to top
Related links:
http://www.dcrco.com
CONTACT:
Steven P. Altman, CPA, of Duff & Phelps
Credit Rating Co., 312-368-2090, altman@dcrco.com; or Eric
Stephenson, 212-908-0859, estephenson@fitchibca.com, for Duff &
Phelps
|
