Casino

PROVIDENCE — In another reflection of the precarious state of finances at Twin River, one of the major credit-rating agencies has notified the investment community that the owner of the Lincoln greyhound track-slot parlor is in default on its loan payments.

Standard & Poor’s lowered its corporate credit rating on Twin River’s parent company, UTGR, from CCC- to D on Friday. With the state counting on Twin River to produce upwards of $254 million in revenue this year alone from its 4,751 slots to run state government, top-level officials are watching closely.

Out of every dollar lost into one of the machines, the state currently gets close to 60 cents. State Department of Revenue Director Gary Sasse yesterday said the owners of the Lincoln gambling venue have asked the state for concessions. He would not elaborate, except to acknowledge they have asked the state to extend a 90-day trial period for a promotional-points program, ending soon, that was aimed at generating more business by awarding free play to frequent-players.

According to the statement issued on Friday by Standard & Poor’s: “The rating actions stem from the company’s recent announcement that it has secured an extended forbearance agreement with the first-lien lenders, and under the terms of the forbearance agreement, UTGR will suspend interest payments to its second-lien lenders.”

As a result, “UTGR did not make the Sept. 2, 2008 interest payment on the second-lien senior secured term loan. This constitutes an event of default under the second-lien credit agreement.”

Merrill Lynch, Deutsche Bank and JPMorgan Chase led the lenders group that provided the owners with an estimated $577 million to buy and rehabilitate the former Lincoln Park.

Last March, the company missed a loan payment, prompting negotiations with its lenders and collection efforts by contractors who worked on the $225-million reconstruction project that transformed the aging Lincoln Park racetrack into Twin River. UTGR is a wholly owned subsidiary of BLB Investors, a joint venture of Kerzner International, the Waterford Group and the Starwood Capital Group.

A new “forbearance agreement” gives Twin River a breather until Jan. 31, 2009 — and allows it to suspend payments to some of its lenders — under terms that have not been made public. But S&P said the new forbearance agreement is “subject to the company’s ability to satisfy certain monthly requirements.”

As long as Twin River meets those undisclosed targets, the lead lenders have essentially agreed not to pursue their rights to collect monies due them in a manner that might force Twin River into receivership or bankruptcy. The second-lien holders have not been identified, but the original financing package included a seven-year, $125-million second lien, according to an August 2005 edition of Credit Investment News.

In an interview yesterday, Sasse said the S&P downgrade was not unexpected and “has not affected or altered our discussion with BLB.”

The forbearance agreement, he said, “basically gives BLB the next few months to work with their lenders, with the people they do business with and the state to try to develop a restructuring agreement. If they are unsuccessful in developing a restructuring agreement, it could result in them not being able to meet their obligations to their lenders.”

“Since the state is affected by this, they have approached the state,” he said, “they have asked for certain concessions from the current agreement the state has with them … so they can meet their financial targets under the forbearance agreements.”

Twin River spokeswoman Patti Doyle issued this statement: “The recent downgrading by Standard & Poor’s reflects the precarious position BLB is in and the market’s assessment of our ability to pay the debt owed to our lenders. As was announced last week when the forbearance period was extended to January 31, 2009, we have suspended payments to our second lienholders which places us in default of those loans. During these next months, we will continue to work closely with our lenders, vendors and the State of Rhode Island to reach a satisfactory resolution for all our constituencies, including our employees and customers.”

kgregg@projo.com