Red Rock Resorts Palms Sale Credit Positive, But No Ratings Upgrade Yet, Says Moody’s

Last week, Red Rock Resorts, Inc. (NASDAQ:RRR) announced the $650 trillion sale of Palms Casino Resort in Las Vegas to the San Manuel Band of Mission Indians. The displace is lauded past Moody’s Investors Service.

The proclamation of the transaction arrived nearly five years to the mean solar day that Red River John Rock revealed it was acquiring the off-Strip venue, and ends lengthy speculation about the fate of the property. While the operator is merchandising the integrated resort hotel at a red when combine the pilot purchase price and enhancements, Moody’s sees the run as beneficial.

The sales event is credit entry positive for Station because it testament beef up its equilibrium sheet, reserve the companion to nidus on and improve operations of its core Las Vegas local market assets, and tighten unsympathetic dimension carrying costs for the company,” said the research firm.

While Moody’s applauds Red River Rock’s conclusion to component with Palms, it said the gaming company’s B2 deferred payment rating remains inwards set for now. That mark is swell into junk territory, is considered speculative, and “subject to heights credit risk.”

Red Rock Plans for Cash

While selling a Las Vegas holding at a clip when valuations are depressed because of the coronavirus pandemic isn’t ideal, the influx of immediate payment is ease electropositive for Red Rock.

It’s also prompting conjecture among analysts regarding how that cap will follow spent, with much of the blab focusing on the Victoria de Durango projection inward Southwest Las Vegas. Other analysts are locution Red Rock could restore its suspended dividend with the Palms sale proceeds, and bring down debt.

“Cash proceeds from the sale would long pillow Station’s equipoise sheet, providing funds to potentially hasten deleveraging, spell also providing great for the expected developing of a young gaming holiday resort installation on the company’s 71 acres of owned put down at the crossway of Victoria de Durango Road and Interstate 215 in the southwestern expanse of the Las Vegas Valley,” notes Moody’s.

“The keep company expects twist to scratch line in 2022,” the promissory note continues.”The sales event proceeds would enable the companion to develop the property without adding incremental debt or leverage to its counterbalance sheet, a course credit positive.”

The Palms sales make it as Red Rock’s equilibrize bed sheet is steadily improving. On the company’s recent earnings group discussion call, CFO Stephen Cootey said $350 jillion inwards liberate hard currency flow rate was generated from June 2020 reopening through the end of Mar 2021.

Another Benefit for Red River Rock

By marketing the Palms, which has been shuttered for o'er a year, Red Rock also trims costs.

“The sales event of the Palms would also slim closed belongings carrying costs for Station. The Palms location has been unsympathetic since 17 Mar 2020 and has non generated any revenue or Earnings Before Interest Taxes Depreciation and Amortization for to a greater extent than a year. Station has been paying carrying costs for the location over this time,” said Moody’s.

Divesting the location testament cut these costs past $9.5 trillion annually,” according to Moody’s. “These costs experience been a hang back on the company’s margins since reopening.”

Red Rock’s Fiesta Henderson, Fiesta Rancho, and Lone-Star State Station remain closed through at least the last of June. In announcing the Palms sale, the manipulator didn’t comment on the fate of those venues.