EFTA01385367

January 2018 HY Corporate Credit HY Multi Sector.Media. Cable & Satellite With this report we are reaffirming our Buy rating on PENN 5.625% Senior Notes 2027 ($103.8, 5.0% YTW, 261bps) given our belief that the notes are attractive on a relative value basis. For 2017, we are projecting Penn National will generate Adjusted EBITDA of $868 million (+3.0% versus S844 million) on revenues of $3.15 billion (+4.0% versus $3.03 billion). Factoring capital expenditures of $105 million, cash interest of $56 million, cash tax refunds of $31 million, payments of financial obligation of $455 million, share repurchases of 525 million, and acquisitions of $128 million (includes earned-out payment related to the Rocket acquisition), we project free cash flow of $133 million in 2017. Using our projected total debt of $4.85 billion and fixed charges of $512 million, we estimate Penn National will end the year with leverage of 5.6x and coverage of 1.7x. Factoring consolidated cash of $265 million, we estimate net leverage at 5.3x. For 2018, we are projecting Penn National will generate Adjusted EBITDA of $912 million (+5.0% versus $868 million) on revenues of $3.21 billion (+2.0% versus $3.15 billion). Factoring capital expenditures of $115 million, cash interest of $55 million, cash taxes of $30 million, payments of financial obligation of $462 million, and share repurchases of $25 million, we project free cash flow of $225 million in 2018. Using our projected total debt of $4.62 billion and fixed charges of $517 million, we estimate Penn National will end the year with leverage of 5.1x and coverage of 1.8x. Factoring consolidated cash of $265 million, we estimate net leverage at 4.8x. !Exhibit 6: Penn National (S 2015(A) 2018 (A) LTM 2017 (E) 2018161 Adjusted EINIDAR $786 8944 $868 SEM $012 Less: Development Capex 137 19 $28 $27 $60 Less: Maintenance Capex 63 79 74 78 65 Less: Advances to Jamul 130 184 17 1 0 Less: Acquisitions 453 91 161 128 0 Less:Cash interest 45 61 64 56 55 Less: Rent Payments 437 442 451 455 462 Less: Share Repurchases 0 0 25 25 25 Less: Cash taxes 5 III) 1211 1311 30 Less: Insurance Financing I1 0 I 3 0 Plus: Asset sales I 18 6 1 0 Plus: Proceeds from Jamul (24) 274 279 5 0 Free Cah Flow 05081 3271 $345 $133 $225 Total Debt 55.300 $4,947 $4,904 $4,847 $4,622 Cash 237 230 265 265 265 Leong, 6.7x 5.9x 5.7x 5.0x 5.1x Na Lemnos 8Ax 5.0x 5Ax 5.3x 4.Etx Cowan 1.7x 1.7x 1.7x 1.7x 1.8x Scatty Comae,/ FS'q aro bunch. &int Downside risks to our call include a deterioration of industry fundamentals and higher-than-expected cannibalization from the opening of new competition. lied Hock Resorts' From an operating perspective, it was a good quarter, as results were modestly ahead of consensus expectations. Similar to previous quarters, F&B headwinds and disruptions from renovations at Palms and Palace Station continue to hurt Las Vegas operations. From a strategic perspective, we are somewhat concerned regarding the incremental spend at Page 92 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086651 CONFIDENTIAL SDNY_GM_00232835 EFTA01385367