S&P Assigns Speedway Motorsports B+ Sub Ratings
28 July 1997
S&P Assigns Speedway Motorsports B+ Sub Ratings
NEW YORK, July 28 -- Standard & Poor's today has assigned its
single-'B'-plus rating to Speedway Motorsports Inc.'s privately placed Rule
144A $125 million senior subordinated notes due 2007 and outstanding
$74 million 5-3/4% convertible subordinated debentures due 2003.
Additionally, Standard & Poor's has assigned its double-'B' rating to
Speedway Motorsports' $175 million senior unsecured revolving credit facility
due 2002 and its double-'B' corporate credit rating to the company.
The outlook is positive.
Ratings on Speedway Motorsports' reflects its leading market position in
the rapidly growing motorsports industry, improving operating performance, and
moderate capital structure, offset by a substantial near-term capital
expenditure program, and the company's growth ambitions. Speedway Motorsports
and competitor International Speedway Corp. are the nation's two-largest
companies hosting races sanctioned by the National Association for Stock Car
Racing Inc. (NASCAR). Speedway Motorsports derives about 80% of its revenues
and an even greater percentage of operating cash flow from 15 NASCAR events.
Operating cash flow has rapidly grown over the past several years as seating
capacity expansions at its core Charlotte and Atlanta racetracks have fueled
rising attendance. Growth has also been fueled by the opening of a newly
constructed racetrack in Texas and two acquisitions, which have increased the
number of tracks to five from two in 1995. Profitability is seasonal, with
the bulk of operating cash flow generated in the second and fourth quarters
when the company's events are held. Significant growth in spectator
attendance as well as television viewership has facilitated an increasing
number of sponsorship agreements with major consumer products firms and the
1996 favorable renegotiation of its long-term television broadcasting
contracts. Tobacco industry sponsorship and advertising may be eliminated
over the near term, but Standard & Poor's anticipates that lost revenues will
be replaced due to the popularity of stock car racing and the diverse base of
sponsors and advertisers. High construction costs and a limited supply of
NASCAR racing dates has created important barriers to entry. However, due to
the uncertainty of being awarded additional event dates, a $6 million 50%
equity investment was made in an underperforming North Carolina track in 1995
with a NASCAR event in order to shift the date to the recently built Texas
track. Growth has been financed through a combination of debt and equity with
about $144 million of common stock issued in 1995-1996. Standard & Poor's
expects that pro forma operating cash flow coverage of interest expense will
exceed 4.0 times (x) for the last 12 months ending June 30, 1997. Coverages
are expected to remain fairly strong due to a good operating outlook and
management's prudent financial policies. Spectator demand for major events
continues to exceed existing permanent seating capacity, allowing for seating
capacity expansion opportunities. The firm has a sufficiently strong
financial profile to accommodate its ongoing expansion strategy. Speedway
Motorsports company plans to spend about $295 million for its 1996-1997
capital expenditures program, substantially exceeding operating cash flow, to
continue adding permanent seating at its tracks.
OUTLOOK: Positive.
Coverages are expected to remain strong for the rating level. However,
continued progress in enhancing operational diversity will be needed for
consideration of a higher rating. -- CreditWire
SOURCE Standard & Poor's CreditWire