What if you had a chain of casinos and nobody was allowed in ? You’d mothball them; stop building a new garage; temporarily let go of almost all your employees; cut senior manager salaries and look for virtual business opportunities. Anyway, that’s what Full House Resorts Inc. has been doing and has managed to reduce its monthly “burn” rate to $3mn and still has $21.4mn in cash to (slowly) spend. This was all laid out in a April 17, 2020 press release.
Even the lenders to the company seem to be patient: waivers of covenant defaults are being negotiated, both recent and prospective. That seems to be good news for the only BDC with exposure: Great Elm Corporation (GECC). The total cost invested in the Senior Notes of the company, due in 2024, is $9.7mn, which was valued at par at 12/31/2019.
We added Full House to the Underperformers list a few weeks ago just on the basis of the industry and the knowledge that every location would be closed. We began with a CCR 3 rating. Given the interruption of all business activity we’d have expected to downgrade this to a CCR 4 and ultimately to a CCR 5, i.e. non-performing. However, we’re leaving our rating unchanged based on this update, and we assume what cash the company does have is still servicing debt. With the casinos likely to re-open and virtual gambling on the cards (we couldn’t resist), the company may yet revert to performing status. Ironically, we’re even going to mark the credit trend as “Up” , something we’ve had no occasion to do in weeks, because of the apparent agreement with the casino chain’s lenders.
We’ll circle back when we hear more.