GGRAsia – Everi rating watch positive amid planned IGT tie: Fitch

Everi rating watch positive amid planned IGT tie: Fitch

Jun 14, 2024 Newsdesk Latest News, Top of the deck, World

Casino slot machine and financial technology (fintech) supplier Everi Holdings Inc has been kept at rating watch ‘positive’ by Fitch Ratings Inc, regarding Everi’s ‘BB-’ long-term issuer default rating and debt instruments.

Fitch said in a Thursday press release that the rating watch was in light of the proposed US$2.6-billion tie between Everi and casino equipment and gaming content supplier International Game Technology Plc’s (IGT’s) global gaming and PlayDigital units.

It is expected the deal – announced at the end of February – will be closed “later this year or in early 2025,” according to the companies.

Fitch stated the rating watch on Everi “reflects the expectation of a stronger credit post-merger given the increased scale and diversification of the combined entity with IGT, material synergy opportunities, and potential growth opportunities.”

The ratings agency added: “The combined entity is projected to have pro forma 2024 revenue and adjusted EBITDA [earnings before interest, taxation, depreciation and amortisation] of US$2.7 billion and US$1 billion, respectively.”

Brokerage B.Riley Securities Inc said in an April note that the would-be partners had obtained debt commitments of US$3.7 billion to pay off existing debt and to make the US$2.6 billion payment to what the institution termed the “IGT/RemainCo,” i.e., the entity that will retain the lottery business segment not part of the merger plan.

About US$1.0 billion of the proceeds will be used to refinance Everi’s existing debt.

The financial commitments originally included an additional US$500 million revolving credit facility, which has been increased to US$750 million.

Fitch considered in its Thursday memo that the combined business would offer a “one-stop shop… across land-based gaming, iGaming, sports betting and fintech”.

As for Everi itself, the company’s revenue stream was already “diversified with gaming operations representing 41 percent, gaming sales at 35 percent, fintech at 14 percent, and digital at 10 percent,” noted the institution.

Fitch said Everi’s management estimates mid-single digit revenue growth “through 2026 based on current business plans”.

Further growth potential would stem from “distributing Everi’s content into IGT’s existing networks, distributing fintech solutions in international and distributed gaming markets, and expanding IGT game content into the Class II category,” said Fitch, referring latterly to gaming machines for the non-commercial casino sector in North America.

In May, Everi posted first-quarter net income of US$4.6 million, on revenue that fell 5.6 percent year-on-year, to US$189.3 million. Judged sequentially, the firm’s net income rose 142.1 percent, despite a 1.4-percent quarter-on-quarter decline in revenue.

Randy Taylor, Everi’s chief executive, said at the time that the company expected “significant growth opportunities” from the combination with IGT’s gaming and digital businesses.

In March, Vince Sadusky, chief executive of IGT, said the deal offered “compelling revenue synergies”.