Scientific Games Corporation has announced that its wholly owned subsidiary, Scientific Games International Inc, has completed an amendment to its credit agreement extending the maturity of its US$3.28 billion of existing term loans and reducing the applicable interest rate to a rate of LIBOR plus 325 basis points with no LIBOR floor.
All of the term loans under the credit agreement are now scheduled to mature on 14 August 2024, subject to accelerated maturity.
“Our ongoing attention toward improving operating execution, generating stronger cash flows and deleveraging our balance sheet has enabled us to amend our credit agreement on more favorable terms,” said Scientific Games CEO Kevin Sheehan. “Moreover, by improving our capital structure, future cash flow is further strengthened.”
According to Union Gaming analyst John DeCree, the interest rate reduction will save Scientific Games US$25 million annually with a credit rating upgrade in the not too distant future likely.
“Scientific Games has clearly turned a corner as it relates to the capital structure,” DeCree said. “With significant interest rate reductions over the past three quarters, we now expect accelerating FCF to begin having a greater impact on debt reduction.
“We are currently modeling Scientific Games’ net leverage to hit below 6.5x by year end and below 6.0x by the end of 2018. We believe Scientific Games could be heading towards a credit ratings upgrade sooner than later, which would be another catalyst for the equity and set the stage for further capital structure improvements.”
DeCree added that the company’s strong 2Q17 financial results highlighted its progress.
“The gaming business is gaining traction, and Scientific Games continues to gain pricing power on its higher end cabinets,” he said. “We are looking forward to a promising G2E in early October, which could serve as another near-term catalyst for the shares.”
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