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Fitch Ratings likes Seminoles

 Here is the press release from Fitch Ratings, documenting their upgrade of the Seminole Tribe of Florida.

 Fitch Ratings assigns a 'BBB' rating to Seminole Tribe of Florida's (STOF) proposed $395 million incremental term loan B. Fitch also upgrades STOF's Issuer Default Rating (IDR) to 'BBB-' from 'BB+', the gaming division's parity debt to 'BBB' from 'BBB-' and the tribe's special obligation bonds to 'BBB-' from 'BB+'. The Rating Outlook is revised to Stable from Positive.

The proposed term loan will be pari passu with STOF's existing term loan and gaming enterprise
revenue bonds and will be secured by a revenue pledge of STOF's gaming operations, which
include six major casinos in the state of Florida with nearly 12,500 slot machines and
approximately 340 table games.

The proposed term loan will amortize at a rate of 10% per year with a balloon payment in 2017 of
approximately $237 million. The proceeds will be used to repay $367 million in outstanding 2010
bonds and pay associated fees including $21 million in call premiums. The term loan is being
issued pursuant to the accordion option on the existing term loan, which permits STOF to issue
incremental loans as long as pro forma net leverage remains at or below 2x, or up to $500 million,
whichever is greater.

The upgrade of STOF's IDR to investment grade is supported by Fitch's increased comfort with the
tribe's governance and fiscal management. Previously Fitch downgraded STOF out of investment
grade following the tribe receiving a Notice of Violation (NOV) related to the spending of gaming
revenues from National Indian Gaming Commission (NIGC) in 2010. The tribe resolved all
violation cited in the NOV and has successfully undergone three annual audits of its compliance
with its Revenue Allocation Plan (RAP). The audits were required per STOF's agreement with the
NIGC; however, the tribe elected to continue to undergo these audits on voluntary basis, which
Fitch views positively.

Also since 2010 a new council has been elected in May 2011 and has taken measures to improve
the tribe's fiscal management. Major measures include growing the tribe's reserves and eliminating
per capita payments to newly born minors. Governmental leadership has been relatively stable since
2011. In May 2013, three of the five council seats were up for election with two of the incumbents
remaining in their respective positions. According to tribal leadership there was no major push back
related to the implementation of the resolution to eliminate per capita payments for newly born
minors. The resolution went into effect April 2013.

The tribe's existing reserves provide for approximately three months of governmental operations
including per capita payments, which is an improvement from two months of operations a year ago
and less than a month of operations prior to the new council taking office. The tribe intends to grow
the reserve with surpluses, which are targeted at roughly 5% of gaming EBITDA. STOF's plans for
the reserve are not yet concrete.

STOF's positive operating trends also contribute to the upgrade. STOF's gaming division has
reported 11 straight quarters of revenue growth, which is partially attributed to expansions at
existing properties (most notably in Tampa and Coconut Creek). STOF's gaming operations also
benefit from limited competition, recent elimination of internet cafes and Florida's stronger than
national average economic recovery. STOF's gaming division revenues and EBITDA for the last-12
month (LTM) period ending June 30, 2013 grew by 5% and 3%, respectively, on a year-over-year

As a result of EBITDA growth and a heavy mix of amortizing debt in STOF's capital structure,
STOF's total debt/EBITDA ratio as of June 30, 2013 improved to 1.7x from 2.0x for the prior year's
period. Excluding the tribe's special obligation bonds, leverage is 1.3x. Pro forma for this
transaction and the repayment of the series 2005A bonds (repaid Oct. 1, 2013) debt service
coverage is 4.9x including special obligations bonds and is approximately 6.5x with gaming
division debt only.

STOF's 'BBB-' IDR is commensurate with total leverage (including tribal debt) of 2x or less
although there is room for leverage to exceed this threshold temporarily if Fitch expects that
leverage will decline back within 2x over a relatively short time horizon. Fitch believes that STOF
may look to expand at its flagship properties once there is greater certainty over the state's
regulatory landscape. This may result in additional borrowing; however, Fitch does not expect total
leverage to exceed 2.5x through the development cycle.

Fitch believes that there is adequate cushion in STOF's financial position to maintain investment
grade ratings in an event the state approves additional gaming in the state or STOF's authority to
operate table games (about 18% of EBITDA) is allowed to expire in 2015. (The two events are
mutually exclusive under most plausible scenarios because if the state permits table games at
commercial casinos STOF's ability to operate table games will automatically be extended). STOF's
improved fiscal prudence on the tribal side and ability to stop or reduce revenue share payments in
case of gaming expansion or expiration of table games provide an additional degree of comfort.
Per its 2010 compact with the state, STOF can suspend revenue share payments completely if
gaming is approved outside of southeast Florida. STOF can suspend payments from its Broward
County casinos if integrated resorts are approved in southeast Florida or if STOF's ability to operate
table games is not extended past 2015. In an event pari-mutuels in southeast Florida are permitted
table games, STOF can reduce payments from its Broward County casinos by 50% if revenues there
drop below a base level established prior to table games becoming operational at the pari mutuels.
The effective revenue share is about 12% of gaming revenue and about half of the revenues are
generated in Broward County.

Fitch analyzed scenarios that include additional competition or suspension of table games and
estimated the net negative effect on STOF's EBITDA in a range of 5%-15%. A 15% decline in
EBITDA would raise leverage to approximately 2x, which is still in-line with investment grade
IDR. Fitch believes that the loss of table games is unlikely and would be politically unpalatable.
Cancelation of table games would cause meaningful job losses since table games are labor intensive
and would cut approximately $100 million - $150 million of revenue share to the state.

The state's 2014 legislative session starts March 4, 2014 and ends May 2, 2014. Fitch expects large
resort operators such as Las Vegas Sands and Genting Group to continue to lobby for an integrated
resorts bill while southeast Florida pari-mutuels will seek greater parity with STOF's gaming
operations vis-a-vis tax rate and/or ability to operate table games. The legislature may also consider
other gaming expansion scenarios analyzed in the Spectrum Gaming report (see section below)
such as gaming at all of the state's pari mutuel facilities. There are three tracks in Tampa, one in
Naples and one in Palm Beach that would affect STOF if permitted to convert to casinos (there are
also facilities in Fort Pierce and Sarasota that may have less direct impact).

Spectrum Report
On Oct. 1, 2014 Spectrum Gaming released a draft of the second part of its gaming study report
commissioned by the Florida Senate's gaming committee. The report's findings may help shape the
discussions going into the state's 2014 legislative session.

Spectrum's report analyzed 12 scenarios from status quo to permitting all forms of gaming at the
state's 28 pari-mutuel facilities and six new integrated resorts throughout the state. A scenario of
permitting craps and roulette at STOF's casinos was also reviewed. Although the report did not
provide explicit recommendations with respect to which scenario is best, the report did examine the
positive and negative attributes plus estimated incremental tax revenues and jobs created for each

Key takeaways from the report with respect to STOF:
--A comparison of baseline scenario (STOF's tables are allowed to expire) and table game extension
scenario shows a difference of 1,937 jobs in the first relevant year (Year 2);
--Addition of craps and roulette at STOF's casinos would create 366 incremental jobs over the
extension scenario in Year 2;
--Under most expansion scenarios the state can more than offset the loss of compact payments from STOF especially if the Pennsylvania gaming tax model is instituted. The report suggests that the Pennsylvania tax model of higher tax on slots and lower tax on tables balances well job creation
and tax revenue maximization;
--The report describes the scenario of having two integrated resort casinos in southeast Florida as
having a 'desirable combination of economic benefits via expansion while minimizing the negative

STOF's liquidity is strong with considerable cash balances at the governmental and the gaming
division levels. The nearest maturity is the incremental term loan in 2017, at which point $237
million will be remaining. STOF's gaming division maintains modest positive FCF after tribal
distributions, which it uses for debt reduction or to grow cash balances. The tribe operates the
government at a surplus, which are roughly targeted at 5% of the gaming division's EBITDA.
Outside of gaming, the tribe also receives dividends from its Hard Rock International business.

Transaction Specific Ratings
The one notch differential on the gaming division debt (includes the bonds and the term loan)
relative to the IDR and the investment grade rating reflects:
--The additional debt incurrence test in the credit agreement of 2.5x net leverage for the senior lien
gaming division debt and gaming division interest coverage by EBITDA test of 3.0x. The 2005B
bonds limit debt incurrence if parity debt leverage exceeds 3.5x.
--The gaming division seniority in the casino revenue trustee guided waterfall relative to the special
obligations bonds;
--The gaming division debt holders' ability to shut off the flow of funds at the gaming division level
before distributions into the Governmental Distribution Fund are made if MADS coverage by
EBITDA goes below 2x. Money retained in the waterfall would go towards redeeming the gaming
revenue debt with some carveouts for payments to the tribe to maintain critical governmental
The special obligation bonds only have recourse to the funds available in the Governmental
Distribution Fund so there is risk that the debt service on these bonds will not get paid if MADS
coverage goes below 2x on the gaming side. The special obligation bondholders do not have
recourse to the tribe outside of the cash in the Governmental Distribution Fund, which receives the
flow of funds monies through a trustee after the gaming division debt is paid. Money is released to
the tribe from the Governmental Distribution Fund once the debt service on the special obligation
bonds is paid.
The special obligation bonds' indenture has an additional debt incurrence covenant stipulating that
pari passu debt cannot exceed 15% of Available Revenues.

Positive: Future developments that may, individually or collectively, lead to a Positive Outlook or
an upgrade in the IDR to 'BBB':
--Greater clarity on gaming expansion in the state of Florida and STOF's ability to operate table
games past 2015;
--Continued growth in tribal reserves and a better understanding by Fitch of the potential uses of the reserves;
--Total leverage including tribal debt declining and remaining below 1.5x.
Negative: Future developments that may, individually or collectively, lead to a Negative Outlook or
a downgrade in the IDR to 'BB+':
--A decline in the tribe's reserves related operating pressure on the gaming division and/or reversal
in the tribe's prudent fiscal management;
--Leverage increasing above 2x for extended period of time due to operating pressure or
incremental borrowing. There is capacity in the ratings for leverage to increase slightly above 2x in
conjunction with expansion related financing if Fitch expects STOF to deleverage back to below 2x
Inability to extend table games past 2015 or a broader gaming expansion (such as slots at all of
tracks) could lead to a revision in the Outlook to Negative. Fitch considers both scenarios to be low
probability. The decision to revise the Outlook would depend on STOF's financial profile at the
time of the event and the tribe's ability and willingness to adjust governmental spending in
anticipation of reduced casino distributions.

Fitch upgrades the following ratings:
Seminole Tribe of Florida
--IDR to 'BBB-' from 'BB+'; Outlook to Stable from Positive;
--$367 million gaming division bonds, series 2010A&B to 'BBB' from 'BBB-';
--$280 million gaming division bonds, series 2005B to 'BBB' from 'BBB-';
--$737 million term loan B due 2020 to 'BBB' from 'BBB-';
--$421 million special obligation bonds, series 2007A&B to 'BBB-' from 'BB+';
--$87 million special obligation bonds, series 2008A to 'BBB-' from 'BB+'.


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