Mississippi Gaming Tax Revenue Bond Outlook Revised To Negative On Casino Closures To Reduce COVID-19 Spread

NEW YORK (S&P Global Ratings) March 25, 2020--S&P Global Ratings revised its outlook on Mississippi's series 2015E and 2019A gaming tax revenue bonds to negative from stable, and affirmed its 'A+' rating on the approximately $439.2 million gaming tax revenue bonds outstanding.
"The negative outlook reflects a disruption in operations brought on by the temporary closure of Mississippi's casinos and the uncertainty surrounding the resumption of revenue collections," said S&P Global Ratings credit analyst Thomas Zemetis. Recently, the Mississippi Gaming Commission ordered 26 state-regulated casinos to close temporarily in compliance with statewide efforts to contain the novel coronavirus (COVID-19). Should all Mississippi casinos remain shuttered beyond the late summer, or collectively not perform at levels commensurate with the current rating, we believe there is at least a one-in-three likelihood that we could lower the rating within the outlook period, perhaps by multiple notches. Prior to the COVID-19 pandemic, revenues experienced cyclical swings. Over the past five years, gross gaming revenues have averaged approximately $168.7 million, reversing a prior period of declining revenue following the Great Recession. However, this gross gaming tax revenue bond debt service coverage (DSC) has remained at least good even during previous cyclical economic downturns and operational disruptions following severe weather events and dedicated gaming tax revenues have remained steady. If casino activity resumes normal operations over the near term, we believe DSC could return to very strong levels.
"Although the Mississippi Gaming Commission's order is temporary, we believe the magnitude of the COVID-19 pandemic and the length of time the order may be in effect is uncertain, and once lifted, gaming and entertainment activity in the affected areas will likely take time to fully recover," Mr. Zemetis added.
A pledge of the first taxes, fees, interest, penalties, damages, fines, and other money imposed by the state, and collected per month in connection with gaming operations in Mississippi, secures the bonds. We rate the bonds under our "Priority-Lien Tax Revenue Debt" criteria (published Oct. 22, 2019, on RatingsDirect), which factors in both the strength and stability of the pledged revenues, as well as the general credit quality of the service area where taxes are collected (the obligor's creditworthiness).
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