Fitch Ratings Inc says it expects earnings before interest, taxation, depreciation and amortisation (EBITDA) at casino technology supplier Everi Holdings Ltd “to recover toward pre-pandemic levels by year-end 2021”.
The credit ratings agency said such performance would be “aided in part by the company’s cost cutting initiatives during the pandemic.”
According to Fitch’s estimates, Everi is likely to post total revenue decline “by high single-digits in 2021 relative to 2019”. The credit rating agency expects Everi’s revenues “to reach pre-pandemic levels by 2022 given the relative outperformance of [U.S.] regional gaming compared to other heavily impacted sectors.”
The comments were featured in a Friday release by Fitch, in which it announced an upgrade to Everi’s credit ratings “on stronger recovery prospects.”
Everi slipped to a US$82.1-million loss in 2020, compared to making a US$17.7-million profit in 2019, amid what it described as the “continued impact from the Covid-19 pandemic and related casino closures”. But in the fourth quarter, the group’s net income improved year-on-year, the firm said earlier this month. Such income for the three months to December 31 was positive by US$1.1 million, versus a US$4.1 million loss in the prior-year period.
In its Friday note on Everi, Fitch said it had upgraded Everi’s issuer default rating (IDR) to ‘B+’ from ‘B’. Fitch also upgraded Everi group’s senior secured debt to ‘BB+’/’RR1’ from ‘BB’/‘RR’ and its unsecured debt to ‘B-‘/‘RR6’ from ‘CCC+’/‘RR6’.
In all cases, Everi group’s rating remained below investment grade.
Fitch also revised its rating outlook on the group to ‘stable’ from ‘negative’.
The credit rating agency said the upgrade to ‘B+’ reflected Fitch “having greater clarity” regarding Everi’s deleverage effort, “toward its net leverage target of 3.0 times to 3.5 times, supported by U.S. regional gaming’s stronger recovery through the coronavirus pandemic relative to other heavily affected leisure and entertainment sectors”.
Fitch said Everi’s free-cash-flow generation during second-half 2020 “was stronger than initially expected at the onset of the pandemic”. The credit rating agency added such performance would “support an accelerated” deleverage path following Everi’s incremental debt raise in April 2020, which had led Fitch to downgrade the casino technology supplier to ‘B’ from ‘B+’.
The process of deleverage “could be accelerated” with voluntary paying off of debt, “which the company has a track record of doing,” Fitch pointed out in its latest note on Everi.
The ratings agency stated Everi had a “good business mix,” with about 54 percent of the company’s EBITDA coming from gaming and 46 percent from financial technology (fintech).
It added: “Although revenue in both segments depends on the gaming sector’s health, Everi is less dependent on replacement sales and new casino openings, relative to other gaming suppliers.”
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