NEW YORK ( TheStreet) -- Credit woes still loom for casino companies, according to Moody's Investor Services.
While the drastic monthly U.S. gaming revenue declines have started to subside, it's still unclear when trends will improve from current levels and how sustainable any turnaround will be.
"Measures taken by states to address budget deficits, as well as higher financing costs for gaming companies and lower development spending, could have unfavorable implications for the U.S. gaming sector well beyond any recovery," Keith Foley, senior vice president at Moody's, said in a statement.
In other words, gaming companies that refinanced debt during the recession may really have only put a band aid on the wound. Both MGM Resorts (MGM - Get Report), Boyd Gaming (BYD - Get Report), Isle of Capri Casinos (ISLE - Get Report) and privately-held Harrah's Entertainment, have taken steps to refinance debt amid the recession.>>5 Top Casino Stocks: What's The Riskiest Bet? MGM's debt is more than 10 times the company's cash flow, Moody's said. Harrah's has more than $22 billion of total debt and a debt-to-cash flow ratio of more than 10 times. "We do not believe Harrah's will be able to generate enough cash to improve its leverage and credit metrics, especially during a tepid recovery," Foley wrote. "In all likelihood, Harrah's will have to sell assets, issue equity or restructure its debt obligations. Obstacles accompany all of these measures, however, and they likely would result in impairment to debt-holder claims." Still, Moody's outlook for the sector remains stable, as the rating agency doesn't foresee prolonged severe declined in profits. And there will be some who will remain relatively untouched from these fears.