Fitch Ratings Inc has upgraded casino equipment maker and financial technology (fintech) supplier Everi Holdings Inc’s issuer default rating to ‘B+’, a non-investment grade, from ‘BB-’.
“The one-notch upgrade reflects significantly reduced leverage pro forma for the refinancing, due to the company utilising nearly US$180 million in excess cash to pay down debt and exhibiting strong [earnings before interest, taxation, depreciation and amortisation] EBITDA growth in the first half 2021,” said the ratings agency in a Monday note.
Fitch forecast Everi’s gross leverage to be 3.5 times on a pro forma last twelve months basis and to reach 3.1 times by the end of 2021. “U.S. regional gaming is experiencing a strong recovery trajectory and Everi has additional tailwinds from success of its recent investments in the gaming operations segment,” stated the institution.
Everi said on Monday it expected “record second-quarter results,” on the back of “substantial growth” in its business compared to pre-pandemic levels. The company also announced plans to refinance its outstanding debt.
The casino supplier stated that it expected the contribution from the games and fintech segments to the group’s revenues and adjusted EBITDA in the three months to June 30 to be a “proportional split.”
According to Fitch, about 59 percent of Everi’s EBITDA comes from the gaming segment, and “about two-thirds of the gaming revenue is generated on a participation basis.”
“Everi has been investing heavily in its electronic gaming machine (EGM) content and hardware with strong results to date,” stated Fitch. “Everi has been able to grow its participation EGM footprint steadily and had 15,949 participation games as of March 2021, 6,697 of which were premium units. The premium unit installed base has more than tripled since 2016 with healthy average daily win growth,” it added.
Analyst David Bain, of Riley Securities Inc, said in a Monday memo that the brokerage believed that Everi’s refinancing would result in “about US$16 million of additional free cash flow per annum.”
He added: “We further believe [Everi’s] EBITDA has reached a new baseline from continued win per day gains driven from premium unit installations, market share/ship share gains of recurring/participation installations and of for-sale units, and the thawing of capital budgets by operators for replacement game purchases.”
