Red Rock increases debt offering to $750 million, up by $250 million

The company, which operates more than a dozen properties throughout Las Vegas, including the off-Strip Palace Station and Palms Casino, as well as the suburban Red Rock Resort and Green Valley Ranch Resort, said in a statement it would use the proceeds to repay portions of its current $3.095 billion debt and for “general corporate purposes.” The new debt with mature in 2028.

When the company originally announced the debt offering last week, it preannounced fourth quarter results, saying it expects total revenues for the quarter that ended Dec. 31 to come in higher than the 2018’s three-month period. However, it was unclear if cash flow will exceed or fall below the previous year’s figures.

In a weekly note to investors Sunday, Jefferies Gaming analyst David Katz the credits remain “highly accommodating” to gaming companies, citing VICI Properties’ $2.5 billion debt offering, that will help the company’s involvement in the $17.3 billion Eldorado Resorts-Caesars Entertainment merger.

VICI is acquiring three Caesars properties under the Harrah’s brand in Atlantic City, Laughlin, Nevada and New Orleans for a combined $1.8 billion. VICI will lease the operations back to Eldorado for total annual rent of $154 million.

“Other companies are taking advantage of the market, including Red Rock Resorts this past week,” Katz wrote.

Following Red Rock’s announcement, Analysts focused their attention on preliminary figures surrounding the challenged Palms, where third quarter write downs and one-time charges caused the company to lose $26.8 million in the three-month period.

Red Rock said it expected to pay one-time charges of between $16 million and $22 million over the next two quarters for issues associated with the Palms.

The pre-fourth quarter earnings filing with the Securities and Exchange Commission, Red Rock said the Palms’ net revenues were expected to be approximately $57.2 million to $60.6 million for the last three months of the year, but cash flow would be a loss of up to $4.3 million.

“Palms (cash flow), while still negative, was better than feared which could show we are potentially nearing an inflection point at the ramping property,” said SunTrust Bank gaming analyst Barry Jonas.

Overall for the fourth quarter, Red Rock estimated total revenues would be approximately $447.4 million to $474.2 million – well above $431.5 million the previous year.

“We believe the results will be viewed as very encouraging, given the strong flow through on the core,” said Deutsche Bank gaming analyst Carlo Santarelli.