Moody's Lowers Its Rating On Stratosphere Notes
May 02, 2011
LAS VEGAS -- Moody's Investors Service Inc. lowered its rating on Stratosphere Corp.'s $203 million of first-mortgage notes to Caa from B-2 and will keep the Nevada gaming and tourist concern's debt under review for possible further downgrades. Moody's said Council, the operator of a much-ballyhooed 1,149-foot entertainment and gaming tower in Las Vegas, is troubled by poor location, construction cost overruns, and operational difficulties since its April opening. Many customers attracted to the $550 million tower aren't using the gaming tables, Moody's said. The rating concern said Council's sources of funds are insufficient to service its debt and, at the same time, complete construction of a ``Phase II'' expansion program that includes an additional 841-room hotel. ``As the company currently intends to continue to construct Phase II, the $38 million funding gap will probably result in a note default, exchange offer or other debt restructuring,'' Moody's said. Independent directors of Stratosphere, which is 42%-owned by Grand Casinos Inc. of Minneapolis, have retained Donaldson, Lufkin & Jenrette to negotiate on behalf of the company with creditors. Separately, Stratosphere has said in its second quarter filing with the Securities and Exchange Commission that it has canceled plans for a proposed $30 million aquarium and is reconsidering its plans for a ride in which a giant gorilla would mount the tower. The ride was scheduled to be completed in December.
