Red Rock Hikes New Corporate Debt Selling up to $750mln

The Nevada-based Red Rock Resorts, in a post-market announcement on Friday, released the news that they are selling corporate debt for $750 million, up by $250 million from their previous announcement the day before, and expect the offering to be complete by February 7.

The Gambling Industry Driven by Credit

According to analysts, the current economic environment makes credits highly accommodating for the gambling companies, pointing out the $2.5 billion debt offering by VICI Properties related to the Eldorado-Caesars merger, where the property company will buy three Harrah’s brand properties in Atlantic City, Laughlin and New Orleans, just to lease operations of  these back to the gambling operator for $154 million per year.

The recently Q4 results of expected revenue between $447 million and $474 million Red Rock released, were well above the $431 million last year and beat market expectations, and though the official results are to be announced in February 21, this is probably the main reason why the initial amount of corporate debt selling was raised by 50%.

As per the company’s statement, the proceeds from the forthcoming sale of corporate debt with maturity in 2028 will be used to repay portions of Red Rock’s $3 billion debt and for other general corporate purposes.

Meet Red Rock Resorts

Red Rock Resorts /Nasdaq: RRR/ is the operator of 21 gaming properties in and around Sin City, among which the Stations casinos, Red Rock and Green Valley resorts, and the notoriously Palms, the property that caused Red Rock shares to plummet from $32.00 in August 2018 to $17.56 in August 2019, as market by that time was not impressed with its $312 million purchase from the Maloof family, followed by a $690 million overhaul, bringing the total to almost $1 billion – a significant outlay for a property that is away from the Las Vegas strip with little to no pedestrian traffic, and a property profile that is outside of Red Rock competencies so far, focused on local venues, not billion-dollar resorts.

By the time of this high-caliber Palms purchase by Red Rock rumours were circulating that, the Fertitta brothers, who subsequently became the largest shareholder in the company after acquiring more than 40% of it, knew something the rest of the public did not, namely that there was a huge possibility for the competing nearby Caesar’s Rio property to be demolished to open up space for a new baseball ballpark, but the sale of the off-strip Rio property in December 2019 for $516.3 million to Dreamscape Companies proved that rumours were bogus.

Since the Red Rock share price low in August last year, it started recovering slowly and analysts believe the Palms investment is reaching an inflection point and would soon turn profitable.