The hits Revel keeps on getting is piling up and the latest one is a gut punch straight to the kidneys. Moody’s Investors Service, a leading provider of credit ratings, research, and risk analysis, has dropped Revel’s credit ratings from Caa1 to Caa2, and its senior secured revolver and term-loan ratings from B3 to Caa1.
The Philadelphia Inquirer reports that Moody’s decided to drop Revel’s credit rating in part because of the cash generation the casino has been getting is “significantly below the rate necessary for Revel to maintain an adequate level of liquidity and support of its current debt burden.”
Moody’s is the second credit rating agency to cut Revel’s ratings in the past week, following Standard & Poor’s decision to drop their own ratings of the casino from B- to CCC.
The S&P report, which was released last week, pointed to the same ails Revel has been experiencing since it opened a little under five months ago. In the report, which was quoted by NJ.com, S&P analysts wrote that “the downgrade reflects our view that a strong opening for the Revel Resort was critical to the company’s ability to ramp up cash flow generation to a level sufficient to service its capital structure.”
“The outlook is negative and reflects our expectation that cash flow generated at the Revel Resort is unlikely to grow to a level sufficient to meet fixed charges,” Standard & Poor added.
Even more proof of Revel’s floundering business state was shed to light earlier this week when news broke out that the casino was asking its lenders $100 million just so it can keep its business up and running for the next year-and-a-half.
We already touched on this a few days ago, but Revel’s initial business model of establishing itself as a resort first and a casino second has clearly bitten them in the ass. We said that the rationale would have been much more acceptable if the overall state of business in Atlantic City was flourishing. But it’s not and it hasn’t been for quite some time now.
Revel spokesman Joe Jaffoni is doing his best damage control though, saying that other business aspects of the casino, particularly food & beverage and room rates, are flourishing. To his credit, he did admit to the Inquirer that the company needs to boost its gaming revenue, which only netted $17.5 million in July, a far cry from the $30 million estimates they initially had.
“We would not be satisfied with gaming revenue of $17.5 million,” Jaffoni said, before saying that “slot gaming is really where we are going to make a much more focused push.”
But no matter how the likes of Joe Jaffoni try to spin it, the reality is that growing evidence of the casino’s struggles has already caught the eye of some of the most astute business minds in the country, enough for them to re-adjust Revel’s business standing.
If that isn’t a cause for you to re-assess your overall business model, then you’ll be sinking faster than the Titanic.