--IDR to 'BB+' from 'BB-';

--Senior secured bank credit facilities to 'BBB-' from 'BB+'.

The secured credit facilities are comprised of a term loan with $206 million outstanding as of June 30, 2009 and a $75 million revolver.

The Rating Outlook remains Positive.

The upgrade of the IDR reflects Bally's continued operational and financial improvement driven by its improving and broadening product pipeline, solid market position, and sustained debt reduction. In addition, the upgrade reflects resolution of previous accounting issues as the company's auditors no longer cited material weaknesses in internal controls over financial reporting in the recently filed annual report, which is the first time that has occurred since the company's turnaround.

Despite the difficult operating conditions for casino operators, Bally's operating momentum and solid product pipeline has continued to drive ship share solidly above its installed base market share, which has significantly improved the company's market position over the last few years and dramatically improved its financial results. As of the latest fiscal year-end (June 30, 2009), Bally's latest 12-month (LTM) reported adjusted EBITDA increased 10% to nearly $300 million from $272 million as of fiscal year 2008 (FY08) and is up six-fold from its trough level of around $50 million in FY06.

However, the positive momentum has slowed as expected, and the operating environment is likely to remain challenging in upcoming quarters. Results over the past two quarters have been impacted by the pressure on casino operator capital budgets, which Fitch expects to continue. Resistance in purchasing decisions during the deepest part of the recession in calendar fourth quarter-2008 (Q4'08) and Q1'09 is affecting current results for Bally's systems business, as there is typically a two- to three-quarter lag from purchasing decision to reported results. There was a notable improvement in systems-related purchasing decisions in April 2009 that has been sustained, which should help results in calendar Q4'09 and Q1'10.

In the gaming equipment business, units sold declined by 30%-35% in calendar first half-2009 (1H'09), reflecting the industrywide pressure. However, the company's ship share over the last couple of years has consistently been in the low-to-mid 20% range, which is higher than Bally's roughly 10%-15% installed base market share, indicating its improved market position. In addition, average selling prices (ASPs) continue to grow despite the pressure on unit volume. ASPs increased about 6%-6.5% in calendar 1H'09.

The company's gaming operations business has benefited relative to competitors during the recession by having a greater portion of its mix skewed to a daily fee pricing model, which is less sensitive to reduced customer play levels. Of course, that also limits upside from the positive leverage associated with a rebound in consumer spending. The company has also improved asset utilization with its installed base, which has helped improve gaming operations margins and profitability, partially offsetting the recent pressure on its gaming equipment and systems business segments. Still, Fitch believes customer play levels are likely to remain under pressure into next year, and an ensuing recovery is likely to proceed slowly.

Although Fitch expects the current pressure on casino operators to continue to impact the operating performance of suppliers, there are some mitigating factors that support a more positive secular view.