$400 million in bonds rated

Moody's Investors Service assigned a "Ba2" rating to $400 million in bonds scheduled to be sold by Mandalay Resort Group of Las Vegas later this month.

The 10-year senior subordinated notes will be underwritten later this month by a consortium of investment banks, including Merrill Lynch, Banc of America Securities, Donaldson Lufkin Jenrette and Deutsche Banc Alex. Brown.

The Moody's rating is below investment-grade status. Moody's also confirmed its Baa3 corporate credit rating on Mandalay, with a negative outlook. The ratings affect about $3.9 billion in outstanding debt.

The negative outlook was issued, Moody's said, because "Mandalay Resort Group is weakly positioned at its current ratings level, given its high leverage." Moody's expects the company to use cash flow to reduce debt, but warned it may lower the company's ratings if debt is not reduced to a "more comfortable level."

Proceeds from the bonds are expected to be used to pay down variable-interest bank debt, and won't represent new debt on the company's books. The new bonds will carry a lower, fixed interest rate.

The interest rate has not been determined yet, but will be set later this month when the bonds are priced. The ratings assigned to the bonds by major credit agencies play a significant role in determining how favorable a rate the issuing company will receive.

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