Boyd Gaming Corp. said Monday it was raising $700 million in a private transaction that is expected to help finance the company’s purchase of five regional casinos by the end of the year.
In a pre-market statement Las Vegas-based Boyd said it was offering $500 million in new debt that will mature in eight years. After the markets closed, the company put out a second statement, saying the size of the offering increased by $200 million when the notes pricing came back at a 6 percent interest rate.
Upon the closing, Boyd expects to receive approximately $689 million total.
“The company intends to use the net proceeds in the future for working capital and general corporate purposes,” Boyd Gaming said in a statement.
In looking at the debt deal, Fitch Ratings Service analyst Colin Mansfield said Boyd Gaming’s properties “generate healthy free cash flow, which creates some cushion against potential operating pressure.”
In December, Boyd Gaming announced it was acquiring the operations of Ameristar St. Charles and Ameristar Kansas City in Missouri; Belterra Casino Resort in Indiana; and Belterra Park in Cincinnati from Pinnacle Entertainment for $575 million. The transaction was part of Penn National Gaming’s purchase of Pinnacle Entertainment for $2.8 billion to help off-set potential anti-trust issues.
The land and buildings associated with the Pinnacle properties are owned by real estate investment trust Gaming and Leisure Properties, and Boyd will pay annual rent to operate the resorts.
Separately, Boyd agreed to buy the Valley Forge Casino Resort in Pennsylvania for $280.5 million.
Both the transactions are expected to close this year.
Fitch, in looking at the new debt, said having casinos in Missouri, Indiana, Ohio and Pennsylvania – all new jurisdictions for Boyd – reduces the company’s exposure to Las Vegas, where it operates casinos heavily in the locals gaming market.
“Both the Valley Forge and Pinnacle acquisitions diversify Boyd’s asset base with access to four new regional gaming markets and grow its regional gaming network,” Mansfield wrote. “The company’s exposure to the Las Vegas markets, where it was concentrated, will decline to about 36 percent of property (cash flow) from 44 percent prior to the acquisitions.”
Mansfield said called the Pinnacle properties “market-leading assets” where there is “minimal threat of new competition.”
Boyd Gaming shares were up 37 cents or 1.01 percent on the New York Stock Exchange to close at $36.95.
Last week, Boyd Gaming’s board of directors announced an increase in the company’s quarterly cash dividend to 6 cents per share, up from 5 cents per share. The dividend is payable on July 15.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
