GGRAsia – Sci Games expects slimmer loss, eyes refinancing

Sci Games expects slimmer loss, eyes refinancing

Jan 25, 2018 Newsdesk Latest News, Top of the deck, World

Casino equipment maker and lottery services supplier Scientific Games Corp on Wednesday announced “selected preliminary expected financial results” for the fourth quarter and full year ended December 31. The company said the announcement was made in connection with a proposed refinancing plan.

Scientific Games said it expects consolidated revenue to be in a range of US$820 million to US$825 million for the three months to December 31, up approximately 9 percent from the prior-year period.

The casino equipment maker expects a net loss in the range of US$40 million to US$50 million for the fourth quarter, including a projected US$28 million of restructuring and other charges, which primarily includes costs associated with acquisition of previously Canada-listed sports betting firm NYX Gaming Group Ltd. That deal was completed on January 5.

Attributable earnings before interest, taxation, depreciation and amortisation (EBITDA) are expected to be in the range of US$320 million to US$325 million in the October to December period, the firm said in a press release.

Commenting on Scientific Games’ preliminary results announcement, brokerage Deutsche Bank Securities Inc said it believes that the company’s fourth quarter results “benefited from strong December lottery activity and solid … gaming segment performance”.

While preliminary segment results were not disclosed, Scientific Games noted improvements in its core gaming, lottery and interactive segments.

“Our preliminary results for the fourth quarter 2017 reflect our focus on generating top-line growth and ongoing improvements across our gaming, lottery and interactive operations,” said Kevin Sheehan, chief executive and president of Scientific Games, in a statement included in the press release.

Scientific Games said the announcement of the preliminary results was made in connection with a plan to refinance part of its term loan debt.

The company said it would take advantage of “favourable market conditions” to refinance approximately US$1.4 billion of its outstanding 7.0 percent senior secured notes due 2022 and approximately US$185 million of borrowings under its revolving credit facility. It said such refinancing would be done with a combination of new senior secured term loans and new senior secured notes, as well as approximately US$300 million of new senior unsecured notes.

At the end of the third quarter last year, Scientific Games’ senior secured note balance stood at approximately US$2.13 billion “and became callable on January 1, 2018 at 5.25 percent,” noted Deutsche Bank in its Wednesday note. “We expect a charge of [about] US$73 million in conjunction with the senior secured refinancing,” said analysts Carlo Santarelli and Danny Valoy.

They added: “Given the October senior note issuance at 5 percent, we believe the refinancing of the senior secured debt is likely to shave at least 200 basis points off the cost of capital, an annual interest expense savings of [about] US$30 million (senior secured piece).”

Between 2013 and 2014, Scientific Games was involved in several leveraged acquisitions of rival gaming equipment suppliers totalling billions of U.S. dollars in value, including the US$5.1-billion deal to acquire Bally Technologies Inc.

On Wednesday, Scientific Games said full-year 2017 revenue is likely to be in a range of US$3.08 billion to US$3.09 billion, up by about 7 percent from US$2.88 billion in 2016, the firm said. The full year net loss is expected to be in a range of US$238 million to US$248 million, compared to US$354 million in the previous year.

The company said it expects to report the full results on February 28.