Boyd, Coast deal gets funding

Company getting $1.5 billion at low rates to finance merger

May 05, 2004 - Boyd Gaming Corp. on Tuesday wrapped up financing to complete its merger with Coast Casinos at very low interest rates, reflecting bankers' confidence in the companies' planned consolidation.

Boyd's chief financial officer, Ellis Landau, said the company is particularly pleased with the interest rates it was able to get while putting together both the bank and bond packages, which total approximately $1.5 billion, to refinance all of Boyd's and Coast Casinos' debt.

Landau said the financial package was oversubscribed because banks are very positive about making loans in the gaming sector and because the banks involved found Boyd an attractive company with which to do business.

"Investors like our earnings performance, our asset diversification, our management and the (pending) merger with Coast," he said about the financing deal.

"Boyd could not have timed the financial package better from an interest rate standpoint. The rates will save them a lot of money over the long term," said Eric Hausler, gaming analyst for Susquehanna Financial Group.

"The prevailing view is that the (Federal Reserve Board) will increase rates. Their timing is going to save them a lot of money over the long term," he said.

Boyd at the end of April finished offering $350 million in senior subordinated 10-year notes at a rate of 6 3/4 percent.

The balance of the financing is in bank debt, including a revolving credit facility and a term loan, which were being completed Tuesday, Landau said.

Deutsche Bank, Bank of America and CIBC led the syndication for the bond financing.

"The 6 3/4 percent rate is real good from a historic perspective. It's the lowest we've done and one of the lowest anyone has ever done on a noninvestment grade basis," Landau said.

Boyd's Treasurer Paul Chakmak said Bank of America, CIBC, Wells Fargo, Deutsche Bank and Calyon led the syndication for the bank financing.

The bank financing was arranged for 2 percentage points over a London Interbank Offering Rate of 1 1/4 percent, for a total rate of 3 1/4 interest rate, he said.

"We're very, very pleased with that rate. LIBOR is particularly low even though we attracted a large number of banks," Chakmak said.

The bank financing is subject to the merger being completed, which is expected shortly after regulatory agencies in the five states with Boyd or Coast operations approve the deal.

The Nevada Gaming Control Board and the Nevada Gaming Commission are expected to consider license applications at their regular June meetings.

Shareholders of both companies already have approved the merger.

Hausler also said the merger with Coast Casinos, announced at the beginning of February, is critical for Boyd Gaming.

"Their existing portfolio doesn't have a lot of excitement except for the Borgata (which Boyd owns in partnership with MGM Mirage). Coast brings an increase in scope and scale to the company," he said.

"And it focuses the emerging company on one of the best markets in the country - the Las Vegas locals - while cutting relative exposure in more volatile riverboat markets," he said.

Brian Gordon, spokesman for Applied Analysis, a Las Vegas-based financial consulting firm, added that the merger with Coast Casinos will bring added stability to Boyd.

"Stability comes from more diversified assets and an increased focus on locals business in Las Vegas. Increasing the overall size of the company should also attract added investors," he said.

"Also, with Boyd attracting these interest rates, it'll help them on a consolidated basis going forward," Gordon said.

Together, the emerging company, which will retain the Boyd Gaming name, will have revenues of about $2 billion and will operate 17 properties with 9,050 rooms nationwide. In Las Vegas, it will operate 11 hotel-casinos with a total of 5,300 rooms.

In addition, Coast has a 461-room expansion under way at The Orleans and is about to break ground on its $350 million Southcoast, which will have 700 rooms in the developing residential area south of Las Vegas on Interstate 15.

Boyd Gaming has 7,600 employees in Southern Nevada and 18,000 nationwide, which will be combined with Coast's 7,500 employees, all of whom work in Las Vegas.

The combined company is expected to get about half of its earnings from Las Vegas operations and half from operations in the East Coast and Gulf Coast regions.

The combined operation also is expected to include Harrah's Shreveport, which Boyd is in the process of buying.

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Article Copyright ©: R. Smith, Las Vegas Review-Journal