EFTA01385368.pdf

3 January 2018 HY Corporate Credit HY Multi Sector.Media. Cable & Satellite the Palms. While we believe that the investment at the Palms could generate an attractive ROI, we believe that the ramp of the property will be slow and the overall investment quite high. With this report, we are reaffirming our buy rating on Red Rock Resorts 5.0% Senior Unsecured Notes 2025 ($100.2, 5.0%YlVV, 279bps STW) with a Buy rating given our belief that these bonds offer investors an attractive total return opportunity compared to the DB HY Gaming Index, which is currently trading at 4.6%. For 2017, we estimate Red Rock will report adjusted EBITDA of $505 million (+4.5% versus $484 million) on revenue of $1.64 billion (+12.5% versus $1.45 billion). After factoring the impact of $270 million of capital expenditures, $120 million in land acquisition, $121 million of cash interest, $9 million of cash taxes, $45 million in distributions, $27 million in dividends and $5 million in other cash flow items, we project Red Rock total cash burn of $85 million in 2018. Using our projection of $2.69 billion of debt and a 8104 million cash balance, we estimate Red Rock will end 2017 with total leverage of 5.3x and a net leverage of 5.1x. For 2018, we estimate Red Rock will report adjusted EBITDA of $525 million (+4.0% versus $505 million) on revenue of $1.66 billion (+1.5% versus $1.64 billion). After factoring the impact of $560 million of capital expenditures, $108 million of cash interest, $65 million of cash taxes, $45 million in distributions and $27 million in dividends, we project total cash burn to be $280 million. Using our projection of $2.97 billion of debt and a $104 million cash balance, we estimate Red Rock will end 2018 with total leverage of 5.6x and a net leverage of 5.5x. Exhibit 7: Red Rock Resorts (S Millions) 2016 (A) 2018 (A/ LTM 2017(E) 2018 181 Camdkilted EBITDA $461 $484 $489 $605 $525 Less: Capital Expenditures $130 $162 $211 $270 $560 Less: NA development costs 2 3 3 3 0 Less: Acquisitions 0 306 329 120 0 Less: Cash interest 122 116 118 121 108 Less:Cash taxes 0 10 5 9 65 LOSS: Distilbutions 222 126 43 45 45 Less: Dividends 0 11 27 27 27 Plus: Distributions Irom JV 3 2 2 3 0 Plus: Asset sales 26 11 4 2 0 Fns Cash Flaw $4 l$235) 182311 1$851 11281:4 Total Debt $2.100 $2,367 $2.687 $2.687 $2,967 Cash 116 134 222 104 104 Levenme 4.76 428 5Ax 5.38 5.0X 91441.Avan94 44x 4.6x 4.9x 5.1x 5.59 Cowie, 1.7x 42x 4.2x 4.2x 4.9x SCarre CCeNtWV ASealt WV attune Sn Downside risks include deterioration in Las Vegas Locals market, which may lead to free cash flow coming in below our expectations. Wynn Resorts Post a modest EBITDA beat our investment thesis remains unchanged, as we continue to expect Wynn to be the biggest beneficiary of the second phase of the VIP recovery in Macau. Deutsche Bank Securities Inc. Page 93 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086652 CONFIDENTIAL SDNY_GM_00232836 EFTA01385368