Moody’s Investors Service has upgraded the outlook of a unit of casino equipment provider Scientific Games Corp, to ‘stable’, from ‘negative’. In a rating update issued on Friday, Moody’s said the move “reflected the recovery in the company’s gaming operations as the number of gaming facilities open has favourably increased revenue and operating income for the company.”
The ratings agency affirmed Scientific Games International Inc’s ‘B3’ corporate family rating, an investment grade judged as being “speculative and a high credit risk”.
In its update, Moody’s said that while sequential improvement in 2021 was “expected,” it forecast gaming activity to “remain below pre-pandemic levels until at least 2022,” with the company’s leverage “remaining elevated”.
Scientific Games Corp said in March that its fourth-quarter 2020 net loss narrowed to US$84 million compared to US$111 million in the third quarter, but was still higher than the US$37-million loss posted a year earlier. The group is also a provider of lottery services and online games.
The parent company recorded revenue of US$762 million for the three months ended December 31, 11.7 percent lower than in the fourth quarter of 2019. The firm stated the decline in revenue was related to a decline in sales in its gaming segment as these were “impacted by Covid-19 restrictions for casinos globally”.
The group’s net debt as of December 31, 2020 was US$8.39 billion, down from US$8.59 billion a year earlier.
In Friday’s note, Moody’s said the change in Scientific Games International’s outlook was also supported by the company’s “good cost discipline and more resilient lottery business.”
It added: “These factors along with a pullback in capex [capital expenditure], enabled the company to generate over US$280 million of positive free cash flow in 2020 and Moody’s projects a similar free cash flow level can be achieved in 2021 despite an increase in capex.”
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