GGRAsia – GTech bridge loan on IGT deal slims by US$500 mln

GTech bridge loan on IGT deal slims by US$500 mln

Oct 30, 2014 Newsdesk Industry Talk, Latest News, Top of the deck, World

Lottery and casino equipment specialist GTech SpA on Thursday said a bridging loan it needs for the acquisition of Nevada-based International Game Technology (IGT) will be US$500 million smaller than originally estimated.

The 364-day facility – a portion of it in euros and the remainder in U.S. dollars – will now be US$10.2 billion, rather than the maximum of US$10.7 billion allowed for in an agreement with GTech’s bankers that was announced on August 20.

GTech said in July it was acquiring IGT for US$6.4 billion, comprised of US$4.7 billion in cash and stock, and the assumption of US$1.7 billion in net debt. The deal is due to be completed in the first half of 2015.

Italy-based GTech said the reason for the change in the scale of the bridging loan needed for the deal was that backstop financing for IGT’s 7.50 percent notes due in 2019 was “no longer required”.

On October 8, IGT announced it was offering holders of its principal notes – amounting in aggregate to US$1.3 billion – cash fees if they consented to changes of conditions to facilitate the GTech deal.

A presentation to investors by Alberto Fornaro, GTech’s chief financial officer, and filed with Nasdaq by IGT on October 24, said that “expected synergies of over US$280 million” could be achieved from the tie up.

“The transaction…creates immediate financial value as we expect it to be accretive to cash flow. To that end, we expect to achieve US$280 million of EBITDA [earnings before interest, taxation, depreciation and amortisation] synergies within three years,” said Mr Fornaro.

He added: “The transaction also diversifies our sources of revenue by products. In the combined company, gaming equipment would have made up 51 percent of 2013 pro forma revenues and 43 percent for lotteries and interactive.”

In the presentation prior to Thursday’s announcement, the GTech executive said the original US$10.7 billion bridging loan requested, included fees of 1.5 percent. He added that the main uses of the money were US$3.7 billion in cash consideration for IGT’s business, US$1.3 billion to backstop IGT notes; EUR2.8 billion (US$3.5 billion) to backstop GTech notes; and US$0.6 billion in drawn credit facilities.

On August 20, GTech named the lead arrangers and joint book runners on the credit facility as Credit Suisse AG, Barclays PLC, and Citigroup Inc.

On Tuesday, Bloomberg News reported that banks, led by JPMorgan Chase & Co, put off syndicating US$3.19 billion of loans for U.S.-based lottery specialist Scientific Games Corp that are intended to finance its purchase of Nevada-based slot machine maker Bally Technologies Inc, leaving the lenders currently holding the debt. The news outlet cited four people with knowledge of the matter.